VIRAGEN EUROPE LTD, SB-2, 1996-07-01

VIRAGEN EUROPE LTD
SB-2, 1996-07-01
FURNITURE STORES

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<PAGE> 1
As filed with the Securities and Exchange Commission on July 1, 1996.

Registration Statement No. 333-______________
===============================================================================

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

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

FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

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

VIRAGEN (EUROPE) LTD.
(Name of Small Business Issuer in its Charter)

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

<TABLE>
<S> <C> <C>
Delaware 2830 11-2788282
(State or other juris- (Primary Standard (I.R.S. Employer
diction of incorporation Industrial Classifi- Identification No.)
or organization) cation Code Number)
</TABLE>

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

2343 West 76th Street
Hialeah, Florida 33016 2343 West 76th Street
(305) 823-0269 Hialeah, Florida 33016
(Address and telephone (Address of principal place
number of principal of business or intended principal
executive offices) place of business)

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

Gerald Smith
Viragen (Europe) Ltd.
2343 West 76th Street
Hialeah, Florida 33016
(305) 823-0269
(Name, address and telephone number of agent for service)

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

With copies to:

Jim Schneider, Esq.
Gayle Coleman, Esq.
Atlas, Pearlman, Trop & Borkson, P.A.
200 East Las Olas Boulevard
Suite 1900
Fort Lauderdale, Florida 33331
(954) 763-1200

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

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As
soon as practicable after the effective date of this Registration Statement.

If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, check the following box: [X]

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

<PAGE> 2

If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]

If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the
Securities Act registration number of the earlier registration statement for
the same offering. [ ]

If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]

<TABLE>
<CAPTION>
======================================================================================

CALCULATION OF REGISTRATION FEE

======================================================================================
Title of Proposed Proposed
Each Class Maximum Maximum
of Securities Amount Offering Aggregate Amount of
to be to be price Offering Registra-
Registered Registered per Unit(1) Price(1) tion Fee
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock
(par value
$.01 per
share) 1,454,954 $25.00(2) $36,373,850 $12,542.70

Common Stock
issuable under
Warrants 1,506,500(3) $25.00(2) $37,662,500 $12,987.07

======================================================================================

Total............................................... $25,529.77

======================================================================================
</TABLE>

(1) Estimated solely for purposes of calculating the registration fee
pursuant to Rule 457(b).

(2) The price with respect to the 2,961,454 shares was estimated based on
the average of the closing bid and asked prices on June 27, 1996.

(3) Represents shares of Common Stock issuable upon exercise of Common
Stock Purchase Warrants. Also includes such additional indeterminate
number of shares as may be issued under such Warrants by reason of the
anti-dilution provisions contained therein.

ii
<PAGE> 3

The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.

iii
<PAGE> 4

VIRAGEN (EUROPE) LTD.

_______________

Cross Reference Sheet for Prospectus Under Form SB-2

<TABLE>
<CAPTION>
Form SB-2 Item No. and Caption Caption or Location in Prospectus
------------------------------ ---------------------------------
<S> <C> <C>
1. Forepart of Registration Cover Page; Cross Reference
Statement and Outside Sheet; Outside Front Cover
Front Cover of Prospectus Page of Prospectus

2. Inside Front and Outside Back Inside Front and Outside Back
Cover Pages of Prospectus Cover Pages of Prospectus

3. Summary Information, Risk Prospectus Summary; High Risk
Factors Factors

4. Use of Proceeds Use of Proceeds

5. Determination of Offering Cover Page; High Risk Factors
Price

6. Dilution Not Applicable

7. Selling Security-Holders Sales by Selling Security Holders

8. Plan of Distribution Outside Front Cover Page of
Prospectus; Sales by Selling Security Holders

9. Legal Proceedings Business

10. Directors, Executive Offi- Management
cers, Promoters and Control
Persons

11. Security Ownership of Cer- Principal Stockholders
tain Beneficial Owners and
Management

12. Description of Securities Description of Securities

13. Interest of Named Experts Legal Matters
and Counsel

14. Disclosure of Commission Undertakings
Position on Indemnifica-
tion for Securities Act
Liabilities
</TABLE>

iv
<PAGE> 5

<TABLE>
<S> <C> <C>
15. Organization within Last Not Applicable
Five Years

16. Description of Business Business

17. Management's Discussion Management's Discussion and
and Analysis and Plan of Analysis or Plan of Operations
Operation

18. Description of Property Business - Properties

19. Certain Relationships and Certain Transactions
Related Transactions

20. Market for Common Equity Price Range for Common Stock;
and Related Stockholder Description of Securities -
Matters Certain Market Information.

21. Executive Compensation Management - Executive Compen-sation

22. Financial Statements Financial Statements

23. Changes in and Disagree- Management's Discussion and
ments with Accountants on Analysis or Plan of Operations -
Accounting and Financial Replacement of Independent
Disclosure Auditors
</TABLE>

INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.

v
<PAGE> 6

Preliminary Prospectus Dated July 1, 1996
Subject to Completion
PROSPECTUS

VIRAGEN (EUROPE) LTD.

2,961,454 SHARES OF COMMON STOCK

There are 2,961,454 shares of Common Stock (the "Shares"), par value
$.01 per share ("Common Stock") of Viragen (Europe) Ltd. (the "Company" or
"VEL") being offered by certain stockholders of the Company (the "Selling
Security Holders"), if at all, on a delayed basis, including shares issuable
upon the exercise of Common Stock Purchase Warrants issued by the Company
(collectively the "Warrants"). An aggregate of 1,203,000 shares of Common Stock
were acquired by Selling Security Holders in three separate private placements
during fiscal 1996 to accredited investors including (i) an offering completed
in December 1995 of 240,000 Shares of Common Stock and Warrants to purchase
840,000 Shares of Common Stock at $6.00 per Share and (ii) two separate
offerings completed in March 1996 of an aggregate of 768,000 shares of Common
Stock and Warrants to purchase 216,500 shares of Common Stock at $12.00 per
share (hereinafter sometimes collectively referred to as the "Private
Placements"). In addition, this Prospectus also relates to the sale by other
Selling Security Holders of 195,000 shares of Common Stock and Warrants to
purchase 450,000 shares of Common Stock issued to consultants, agents and other
stockholders. See "Sales by Selling Security Holders" and "Description of
Securities."

The Company's Common Stock is traded on a limited basis on the OTC
Bulletin Board under the symbol "VERP," and on June 27, 1996, the closing bid
price for the Common Stock was $25.00. The Company intends to apply for
inclusion of its Common Stock on the National Association of Securities Dealers
Automated Quotation System ("NASDAQ") at such time as the Company satisfies the
NASDAQ minimum listing requirements. However, there can be no assurances that
the Company's Common Stock will be accepted for inclusion in the NASDAQ System.
Furthermore, there can be no assurances that a substantial trading market for
its Common Stock will develop or be sustained in the future. At March 31,
1996, the net tangible book value of the Company's Common Stock was
approximately $.85 per share inclusive of common shares subscribed.
Accordingly, it is likely that the purchasers in this offering will incur an
immediate and substantial dilution from the purchase price of their shares of
Common Stock. See "Price Range of Common Stock."

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

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

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

This date of this Prospectus is _______________, 1996

<PAGE> 7

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

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

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

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

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

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

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

The Company has filed with the Securities and Exchange Commission
("Commission") a Registration Statement on Form SB-2

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<PAGE> 8

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

3
<PAGE> 9

PROSPECTUS SUMMARY

The following is intended to summarize more detailed information and
financial statements and notes thereto which are set forth more fully elsewhere
in this Prospectus or incorporated herein by reference and, accordingly, should
be read in conjunction with such information. Except as otherwise specifically
described in the Registration Statement, of which this Prospectus is a part,
all information gives effect to a one-for-fourteen (1:14) reverse stock split
of the Company's Common Stock, effective May 2, 1996.

THE COMPANY

Viragen (Europe) Ltd. (formerly "Action Associates, Inc.," and
thereafter, "SRSI Capital Group, Inc.," and "Sector Associates, Ltd.,"
respectively), incorporated in November 1985, was initially organized to seek
business opportunities which offered a potential for profit including the
acquisition of existing businesses or the acquisition of assets sufficient to
establish an active business for the Company. In December 1995, the Company
completed an Agreement and Plan of Reorganization wherein the Company acquired
100% of the outstanding stock of Viragen (Scotland) Limited ("VSL"), a Scottish
private company, in exchange for the distribution to Viragen Inc. ("Viragen")
("VRGN" - NASDAQ SmallCap), the sole stockholder of VSL, of newly issued shares
of convertible preferred stock of the Company (representing approximately 94%
of the then issued and outstanding capital stock interest of the Company).

Through a license granted to VSL in July 1995 by Viragen Technology,
Inc., a wholly-owned subsidiary of Viragen ("VTI"), VSL secured certain
exclusive rights applicable to the European Union ("EU") countries and certain
non-exclusive rights throughout the world (excluding the United States and its
territories). Pursuant to such license, VSL is authorized to engage in the
research, development, manufacture and sale of certain proprietary
immunological products for commercial application, particularly human leukocyte
interferon, including Omniferon(TM), Viragen's human leukocyte interferon
product, for antiviral and therapeutic applications and as anticancer agents.
In connection with the grant of these rights, VSL then 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 (the "Product") for
exclusive distribution within the EU and non-exclusively worldwide in return
for certain royalty fees and preferential access to the Product for Scottish
patients at preferential prices.

4
<PAGE> 10

The Agency has committed to manufacture the Product in sufficient scale
to accommodate VSL's EU clinical trials and, subsequently, for commercial sales
in amounts to be agreed upon by the parties. The Agency will also participate
in studies relevant to the Product and cooperate with the Company and Viragen
in obtaining and maintaining compliance with the laws and regulations of the
EU's regulatory authorities in connection with the production, clinical trials
and distribution of the Product.

The Company expects to concentrate its efforts on preparing, filing and
processing the necessary applications and obtaining approvals to manufacture
and distribute the Product within the EU. Viragen, the majority stockholder of
the Company, has assembled an advisory committee consisting of scientists,
medical researchers and clinicians to assist the Company in regulatory
compliance matters and the necessary applications to the EU regulatory
authorities. See "Business."

The Company's administrative office, research and manufacturing
facilities are presently located at 2343 West 76th Street, Hialeah, Florida
33016 (Telephone No. (305) 823-0269; Facsimile No. (305) 557-6931).

THE OFFERING AND OUTSTANDING SECURITIES

<TABLE>
<S> <C>
Common Stock Outstanding
at June 12, 1996 . . . . . . . . . . . . . . . . 6,922,830 shares of Common Stock

Common Stock Offered
by Selling Security Holders . . . . . . . . . . 2,261,454 shares of Common Stock(1)

Proceeds to be received upon
exercise of Warrants . . . . . . . . . . . . . . $11,238,000(2)

Shares underlying all Warrants
Outstanding at June 12, 1996 . . . . . . . . . . 1,560,816 shares of Common Stock(3)

Risk Factors . . . . . . . . . . . . . . . . . . . . Investment in these securities involves a high degree of
risk. See "High Risk Factors."

OTC Bulletin Board Symbol . . . . . . . . . . . . . . VERP(4)
</TABLE>

- --------------------
(1)Includes 1,506,500 shares issuable upon the exercise of the Warrants.

(2)Includes (i) Warrants to purchase 840,000 shares of Common Stock at $6.00 per
share (for an aggregate of $5,040,000); (ii) Warrants

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<PAGE> 11

to purchase 450,000 shares of Common Stock at $8.00 per share (for an aggregate
of $3,600,000); and (iii) Warrants to purchase 216,500 shares of Common Stock
at $12.00 per share (for an aggregate of $2,598,000).

(3)Includes 1,506,500 shares of Common Stock underlying Warrants offered hereby,
10,120 shares of Common Stock underlying Class B Warrants and 44,196 shares of
Common Stock underlying Class F Warrants.

(4)The Company intends to apply for inclusion of its Common Stock on NASDAQ
(SmallCap) at such time as the Company satisfies NASDAQ listing requirements.
However, there can be no assurances that the Common Stock will qualify for
inclusion at any time in the future. Inclusion on NASDAQ does not imply that
an established trading market will develop or be sustained for the Common
Stock.

SUMMARY CONSOLIDATED FINANCIAL INFORMATION
(Not covered by Accountant's Report)

SUMMARY OF SELECTED CONSOLIDATED FINANCIAL INFORMATION

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

CONSOLIDATED STATEMENT OF OPERATIONS DATA:

<TABLE>
<CAPTION>
Nine Months Ended Year Ended
March 31, June 30,
1996 1995 1995
---- ---- ----
(Unaudited)
<S> <C> <C> <C>
Interest income $27,105 - $626

Net (loss) income (205,186) - 626

Net (loss) income
per average
common share
outstanding (0.07) - 6.26

Weighted average
shares outstanding(1) 2,768,886 - 100
</TABLE>

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<PAGE> 12

CONSOLIDATED BALANCE SHEET DATA:

March 31,
1996 1995 June 30, 1995
---- ---- -------------
(Unaudited)
<S> <C> <C> <C>
Working capital
(deficit) $5,879,758 $ - $ (5,467)

Total Assets 5,927,204 - 57,933

Long Term debt - - -

Stockholders' equity 5,886,309 - 2,240
</TABLE>

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

(1)The information in this table has been retroactively restated to reflect a
one-for-fourteen (1:14) reverse stock split in the Company's shares of Common
Stock on May 2, 1996. The weighted average number of shares outstanding
includes the assumed conversion of the convertible preferred shares, as of the
issuance date, as they were issued with the intention of granting Viragen
control of VEL. Common shares subscribed are assumed outstanding as of the
completion of the March 1996 Private Placements for purposes of the weighted
average shares outstanding calculation. See "Capitalization".

7
<PAGE> 13

HIGH RISK FACTORS

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

HISTORY OF LOSSES AND RISKS OF NEWLY DEVELOPED BUSINESS

During the nine months ended March 31, 1996, the Company incurred
operating losses totalling $205,186. During the eleven weeks ended June 30,
1995, operating results consisted solely of $626 in interest income. At March
31, 1996, the Company had an accumulated deficit of $204,560, working capital
of $5,879,758 and stockholders' equity of $5,886,309. Although the Company has
begun to expand its operations and has generated capital for its working
capital and investing needs, there can be no assurance that the Company will be
able to obtain regulatory approvals necessary for the distribution of its
Product or be able to produce and market its Product on a profitable basis in
the future. Results of operations in the future will be influenced by numerous
factors including technological developments, regulatory costs and impediments,
increases in expenses associated with sales growth, market acceptance of the
Company's Product, the capacity of the Company to expand and maintain the
quality of its Product, competition and the ability of the Company to control
costs. There can be no assurance that revenue growth or profitability on a
quarterly or annual basis can be obtained. Additionally, the Company will be
subject to all the risks incident to a rapidly developing business with only a
limited history of active operations. Prospective investors should consider the
frequency with which relatively newly developed and/or expanding businesses
encounter unforeseen expenses, difficulties, complications and delays, as well
as other factors such as the possibility of competition with larger companies.
See "Management's Discussion and Analysis or Plan of Operations."

ADDITIONAL FINANCING REQUIRED AND POSSIBLE LACK OF AVAILABILITY OF FUNDS

The Company will require substantial financing in the future in order
to initiate and complete the clinical trials required to obtain European Union
approvals for the Product in the treatment of various viral and immunological
diseases, such as Multiple Sclerosis, HIV/AIDS, Hepatitis B and C, and other
viral diseases. The Company is substantially dependent upon the infusion of
capital through private placements, subsequent public financings or joint
venture/strategic alliances in order to initiate and complete the clinical
trials necessary for EU, and/or, UK approvals. There is no

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<PAGE> 14

assurance that such funding will be available upon terms acceptable or feasible
to the Company or its stockholders. See "Management's Discussion and Analysis
or Plan of Operations."

LACK OF EU APPROVAL; ADDITIONAL FUNDING NEEDED

The Company intends to seek EU approvals of the Product for use in
treating certain diseases. The Product has not been approved by the EU
regulatory authorities for use in the treatment of patients, and the Company
may not presently manufacture or distribute the Product. The EU regulatory
approval process is costly and unpredictable, and the process may take several
years to obtain, and there can be no assurance that the necessary EU regulatory
approvals will be received at any time in the future. Further trials will also
require significant additional funding in addition to the proceeds obtained
from the financings previously undertaken. There is no assurance that such
funding can be obtained on a cost feasible basis to the Company. See "Business
- - Regulation."

COMPETITION

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

RISK OF TECHNOLOGICAL OBSOLESCENCE

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

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<PAGE> 15

GOVERNMENT REGULATION MAY AFFECT DEVELOPMENT AND DISTRIBUTION OF PRODUCT

All pharmaceutical manufacturers in the EU are subject to extensive
rules and regulations imposed by EU regulatory authorities. These rules and
regulations are constantly changing and may serve to restrict in whole or in
part the ability of the Company to produce and distribute the Product. If the
Company were not ultimately able to achieve compliance with these rules and
regulations, it would likely have a material adverse effect on the Company's
activities and delay or preclude the development of commercially viable
operations. See "Business - Regulation."

UNCERTAINTY OF HEALTH CARE REFORM MEASURES AND THIRD PARTY REIMBURSEMENT

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

RISK THAT PATENTS AND PROPRIETARY TECHNOLOGY MAY NOT PROVIDE PROPRIETARY
PROTECTION

The Company, through its wholly-owned subsidiary, Viragen (Scotland)
Limited, is dependent on its License from Viragen Technology, Inc. (a
wholly-owned subsidiary of Viragen, Inc., the majority stockholder of the
Company) to develop, manufacture and sell the Product. While the Company's
technology obtained through its license from VTI is proprietary and Viragen
intends to file related patent applications, Viragen has no pending U.S. Patent
applications relating to its current interferon manufacturing technology
process. The Company, through VSL, intends to rely on confidentiality
agreements and trade secret proprietary rights in order to protect its
proprietary technology in the production of the Product. There can be no
assurances that such proprietary technology will enable the Company, through
VSL, to manufacture the Product more efficiently and with greater efficacy so
as to enable the Company to compete effectively with other manufacturers of

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<PAGE> 16

competitive immunological and pharmaceutical products in the EU. In addition,
there is no assurance that others may not independently develop the same or
superior technology to VTI's technology. Furthermore, to the extent that the
Company's production of the Product is alleged to breach a third party's
patents or proprietary technology, it could have an adverse impact on the
Company, even if the Company were ultimately determined not to have breached
such party's patents or proprietary technology. There can be no assurance that
VTI's pending patent applications will be approved, and if granted, whether
such patents will provide substantial protection to the Company. See "Business
- - Patents."

RISKS OF TECHNOLOGY TRANSFERS

VTI has advised the Company that one of VTI's marketing strategies is
to sell the right to use VTI's technology and manufacturing protocols to third
parties who will use them to produce the Product outside the United States.
While the license granted to VSL by VTI provides that VSL has the exclusive
right applicable to the EU countries to engage in the research, development,
manufacture and sale of proprietary immunological products for commercial
application, particularly human leukocyte interferon for antiviral and
therapeutic applications and as anticancer agents, the license also grants
certain non-exclusive rights throughout the world (except within the United
States and its territories). To the extent that VTI sells additional rights to
use its technology and manufacturing protocols within VSL's non-exclusive
territory, VSL's distribution capacity may be diluted which could have an
adverse effect on the Company's profitability. See "Business-License
Agreements."

PRODUCT LIABILITY AND LIMITATIONS OF PRODUCT LIABILITY INSURANCE

The Company and VSL may be subject to claims for personal injuries or
other damages resulting from the Product. A successful claim could have a
materially adverse effect on the Company and on VSL. The Company and VSL
maintain product liability insurance in the amount of $1,000,000 per
occurrence, $2,000,000 aggregate, but there can be no assurance that such
insurance will be available in the future at commercially acceptable rates or
that such coverage will be adequate for the Company's or VSL's purposes.

ASSETS OUTSIDE THE U.S.; ENFORCEABILITY OF CIVIL LIABILITIES AGAINST FOREIGN
PERSONS

While the Company is a U.S. corporation with executive offices in
Florida, it is a holding company for VSL which is domiciled in Scotland. For
the foreseeable future, a substantial portion of the Company's assets will be
held or used outside the U.S. (in Scotland). Enforcement by investors of civil
liabilities under the Federal securities laws may also be affected by the fact

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<PAGE> 17

that while the Company is located in the U.S., its principal subsidiary and
operations are located in Scotland. Although the Company's executive officers
and directors are residents of the U.S., all or a substantial portion of the
assets of the Company will be located outside the U.S.

FOREIGN EXCHANGE RISK

The relationship of the U.K. currency to the value of the U.S. dollar,
and the relative rate of devaluation of the Pound may affect the Company's
operating results. In particular, the Company's accounts receivable will be
denominated in the local currency, the Pound, while the Company's operating
results are recorded in U.S. dollars. Accordingly, any significant devaluation
of the Pound relative to the U.S. dollar could have a material adverse effect
on the Company's operating results.

CONTROL BY INSIDERS AND POSSIBLE LACK OF INFLUENCE BY OUTSIDE STOCKHOLDERS

As of June 12, 1996, Viragen and the executive officers and directors
of the Company own or control 5,300,000 shares of Common Stock, or 76% of the
outstanding shares. Upon completion of this offering and assuming conversion
and exercise of the Warrants, Viragen will be able to control through direct
election of directors and selection of officers, the conduct of operations of
the Company. See "Principal Stockholders."

RISK OF DEPENDENCE ON KEY PERSONNEL

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

NO DIVIDENDS ANTICIPATED TO BE PAID

The Company has not paid any cash dividends on its Common Stock since
its inception and does not anticipate paying cash dividends in the foreseeable
future. The future payment of

12
<PAGE> 18

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

IMMEDIATE SUBSTANTIAL DILUTION TO PURCHASERS IN THIS OFFERING

Initial purchasers of the Common Stock of the Company offered hereby
will incur an immediate and substantial dilution from the purchase price of
their shares. As of March 31, 1996, the net tangible book value of the
Company's Common Stock was approximately $.85 per share (inclusive of Common
Stock subscribed and assuming conversion of Preferred Stock).

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

As of June 12, 1996, there were 6,803,000 shares of the Company's
Common Stock outstanding which were "restricted securities" as that term is
defined by Rule 144 under the Securities Act of 1933 as amended, (the
"Securities Act"), inclusive of shares being registered pursuant to this
Registration Statement of which this Prospectus is a part. Certain of such
shares will be eligible for public sale only if registered under the Securities
Act or if sold in accordance with Rule 144. Under Rule 144, a person who has
held restricted securities for a period of two years may sell a limited number
of shares to the public in ordinary brokerage transactions. Sales under Rule
144 may have a depressive effect on the market price of the Company's Common
Stock due to the potential increased number of publicly held securities. The
timing and amount of sales of Common Stock covered by the Registration
Statement of which this Prospectus is a part, as well as such subsequently
filed registration statement, could also have a depressive effect on the market
price of the Company's Common Stock. See "Shares Eligible for Future Sales."

USE OF PREFERRED STOCK TO RESIST TAKEOVERS; POTENTIAL ADDITIONAL DILUTION

The Company's Certificate of Incorporation authorizes 2,500,000 shares
of Preferred Stock, 2,000,000 shares of which were issued to Viragen in
December 1995 and subsequently converted into 5,600,000 common shares. As
provided in the Company's Certificate of Incorporation, Preferred Stock may be
issued by resolutions of the Company's Board of Directors from time to time
without any action of the stockholders. Such resolutions may authorize
issuance of the Preferred Stock in one or more series and may fix and determine
dividend and liquidation preferences, voting rights,

13
<PAGE> 19

conversion privileges, redemption terms and other privileges and rights of the
shares of each authorized series. While the Company includes such Preferred
Stock in its capitalization in order to enhance its financial flexibility, such
Preferred Stock could possibly be used by the Company as a means to preserve
control by present management in the event of a potential hostile takeover of
the Company. In addition, the issuance of large blocks of Preferred Stock
could possibly have a dilutive effect with respect to existing holders of
Common Stock of the Company. See "Description of Securities."

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

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

BROKER-DEALER SALES OF COMMON STOCK AND LIMITATION ON MARKETABILITY

The Company's Common Stock is not presently included for trading on
the NASDAQ System, and while the Company intends to apply in the near term,
there can be no assurances that the Company will ultimately qualify for
inclusion within that system. In order for an issuer to be included in the
NASDAQ System, it is required to have total assets of at least $4,000,000,
capital and surplus of at least $2,000,000, a minimum price per share of not
less than $3.00, have publicly held shares with a market value of at least
$1,000,000 as well as certain other criteria. While the Company currently
meets the minimum NASDAQ (SmallCap) financial criteria, no assurance can be
given that the Common Stock of the Company will qualify for inclusion on the
NASDAQ System. Until the Company's shares are approved for inclusion in the
NASDAQ system, the Company's Common Stock will be traded in the
over-the-counter markets on the OTC Bulletin Board. As a result, the Company's
Common Stock is covered by a Securities and Exchange Commission

14
<PAGE> 20

rule that imposes additional sales practice requirements on broker-dealers who
sell such securities to persons other than established customers and accredited
investors (generally institutions with assets in excess of $5,000,000 or
individuals with net worth in excess of $1,000,000 or annual income exceeding
$200,000 or $300,000 jointly with their spouse). For transactions covered by
the rule, the broker-dealer must make a special suitability determination for
the purchaser and receive the purchaser's written agreement to the transaction
prior to the sale. Consequently, the rule may affect the ability of
broker-dealers to sell the Company's securities and may also affect the ability
of stockholders to sell their shares in the secondary market. See "Description
of Securities."

PRICE RANGE OF COMMON STOCK

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

<TABLE>
<CAPTION>
PERIOD HIGH LOW
------ ---- ---
<S> <C> <C>
First Quarter ended 09/30/93 1/2 1/8
Second Quarter ended 12/31/93 1-5/8 1-3/8
Third Quarter ended 03/31/94 1-5/8 1/2
Fourth Quarter ended 06/30/94 1-5/8 1/2
First Quarter ended 09/30/94 1-3/4 1/4
Second Quarter ended 12/31/94* 1-1/2 3/8
Period 04/6/96 - 05/01/96 2 3/4
Period 05/02/96** - 05/31/96 27 25
</TABLE>

- --------------------
* No public trading was undertaken with respect to the Company's Common
Stock between January 1, 1995 and April 5, 1996.

** Effective May 2, 1996, the Company effectuated a 1:14 reverse stock
split simultaneously with the change of the name of the Company from Sector
Associates, Ltd. to Viragen (Europe) Ltd.

On June 27, 1996, the closing bid price for the Common Stock was
$25.00.

As of June 12, 1996, the approximate number of record holders of the
Company's Common Stock was 104.

DIVIDEND POLICY

The Company has not paid any cash dividends on its Common Stock since
incorporation. As the Company is in the development

15
<PAGE> 21

stage, has an accumulated deficit, and has significant capital requirements in
the future, it is not anticipated that funds will be available for the issuance
of dividends in the foreseeable future. The Company presently intends to
retain future earnings, if any, to finance the expansion of its business, and
its future dividend policy will depend on the Company's earnings, if any,
capital requirements, expansion plans, financial condition and other relevant
factors.

CAPITALIZATION

The following table sets forth the actual capitalization of the
Company at March 31, 1996, and as adjusted to give effect to the issuance of
Common Stock subscribed and the exercise of Warrants issued in the Private
Placements. All of the Warrants issued in the Private Placements are
exercisable at exercise prices below the current market prices of the Company's
Common Stock.

<TABLE>
<CAPTION>
March 31, 1996
--------------
Actual As Adjusted
------ -----------
<S> <C> <C>
Long term debt . . . . . . . . . . . . . . . . . . . . . . . $ -- $ --

Stockholders' equity:

Convertible Preferred Stock Series B,
$.01 par value per share; 2,500,000
shares authorized; 2,000,000 shares
issued and outstanding . . . . . . . . . . . . . . . . . 20,000 20,000
Common Stock, $.01 par value per share;
20,000,000 shares authorized; 359,830
shares issued and outstanding; 2,829,330
shares to be outstanding . . . . . . . . . . . . . . . . 3,598 28,293

Additional paid-in capital . . . . . . . . . . . . . . . . . 927,055 17,296,776

Common Stock Subscribed . . . . . . . . . . . . . . . . . . . 5,156,416 --

Accumulated deficit . . . . . . . . . . . . . . . . . . . . . (204,560) (204,560)

Foreign Currency Translation . . . . . . . . . . . . . . . . (16,200) (16,200)
---------- -----------

Total stockholders' equity . . . . . . . . . . . $5,886,309 $17,124,309
---------- -----------
Long-term debt and total
stockholders' equity . . . . . . . . . . . . . . $5,886,309 $17,124,309
========== ===========
</TABLE>

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

(1) See Notes to Consolidated Financial Statements included elsewhere
herein for a description of terms of the Company's warrants and
Convertible Preferred Stock outstanding.

16
<PAGE> 22

USE OF PROCEEDS

The Company will not receive any proceeds from the sale of Common
Stock for the accounts of the Selling Security Holders. There is included in
the Registration Statement of which this Prospectus is a part, 1,506,500 shares
of Common Stock underlying Warrants issued in connection with the Company's
Private Placements completed in December 1995 and March 1996. If all of the
Warrants issued in connection with the Company's Private Placements were
exercised in their entirety at exercise prices of $6.00, $8.00, or $12.00 per
Share, respectively, the Company would receive total proceeds of approximately
$11,238,000. Inasmuch as the holders of all of the aforementioned Warrants
have no obligation to exercise such Warrants, the Company is not in a position
to evaluate when and if such derivative securities will ever be exercised and
the amount of proceeds that may be realized therefrom. Accordingly, the
Company is not able to allocate specifically at this time the proceeds that may
be received from the exercise of the Warrants, and any proceeds realized will
be utilized for the development of EU protocols and clinical trial programs and
for working capital purposes. To the extent the proceeds of such exercise are
not used immediately, they will be invested in certificates of deposit, savings
deposits, other interest bearing instruments or will be left in the checking
accounts of the Company.

SELECTED CONSOLIDATED FINANCIAL DATA

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

CONSOLIDATED STATEMENT OF OPERATIONS DATA:

<TABLE>
<CAPTION>
Nine Months Ended Year Ended
March 31, June 30,
-------- ----------
1996 1995 1995
---- ---- ----
(Unaudited)
<S> <C> <C> <C>
Interest income $27,105 - $626

Net (loss) income (205,186) - 626

Net (loss) income
per average
common share
outstanding (0.07) - 6.26

Weighted average
shares outstanding(1) 2,768,886 - 100
</TABLE>

17
<PAGE> 23

CONSOLIDATED BALANCE SHEET DATA:

<TABLE>
<CAPTION>
March 31,
1996 1995 June 30, 1995
---- ---- -------------
(Unaudited)
<S> <C> <C> <C>
Working capital
(deficit) $5,879,758 $ - $(5,467)

Total Assets 5,927,204 - 57,933

Long Term debt - - -

Stockholders' equity 5,886,309 - 2,240
</TABLE>

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

MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS

The following discussion should be read in conjunction with the
consolidated financial statements of the Company and the notes thereto
appearing elsewhere in this Prospectus.

On December 8, 1995, the Company (then named Sector Associates, Ltd.)
acquired 100% of the stock of VSL for 2,000,000 shares of Series B Convertible
Preferred Stock of the Company which, upon conversion, represented 5,600,000
shares of Common Stock or approximately 94% of the then issued and outstanding
capital stock interest of the Company. As the stockholders of VSL gained
voting control of the Company in this transaction, they became the acquiring
entity and accounting survivor. Accordingly, the acquisition 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 Company. The historical financial
statements for all periods presented up to December 8, 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 Company, was a shell corporation with no operations,
stockholders' equity of the combined entity was recapitalized to reflect the
capital structure of the surviving legal entity and the accumulated deficit of
VSL.

VSL was organized during April 1995 by Viragen, Inc. as a Scottish
private company to undertake clinical trials in the European

18
<PAGE> 24

Union and for sales of Viragen's natural alpha interferon products in the EU
and other countries outside the United States. Accordingly, no financial data
is available for Viragen (Europe) Ltd. and its subsidiary, VSL, prior to April
1995.

Through a license granted by Viragen, VSL's ultimate 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 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,
pursuant to which SNBTS, on behalf of VSL, will manufacture and supply VSL's
Product to VSL for distribution in the EU in return for certain fees and
additional rights. SNBTS' services will be subject to all governmental
regulations and procedures pertaining to the manufacture and distribution of
the Product. Management considers it critical to VSL's operation and to
planned clinical trials to secure a sufficient qualified source of human
leukocytes, a critical component in the manufacture of the Product. VSL was a
newly formed company which commenced operations concurrent with the execution
of its agreements with SNBTS.

VSL has been organized by Viragen to undertake clinical trials in the
EU and for the sale of Viragen's natural alpha interferon and related products
in the EU and other countries outside the United States. Viragen has
transferred patent and related proprietary rights associated with the
production of its natural human leukocyte-derived interferon and related
technology to VSL for this purpose. SNBTS has committed to manufacture the
Product in sufficient scale to accommodate the EU clinical trials and may
simultaneously engage in commercial sales in amounts to be agreed upon by the
parties and the European regulatory authorities. SNBTS will also cooperate with
the Company in studies relevant to the Product and with eventual production,
clinical trials and distribution.

The Company initiated a series of Private Placements to accredited
investors to raise capital necessary to complete the planned reverse
acquisition, raise the funding necessary to complete construction of its
Scottish facility and for initial Product testing phases by VSL in Scotland.
In December 1995, the Company completed a Private Placement, raising
approximately $750,000 through the sale of 336,000 units for a purchase price
of $2.23 per Unit. Each Unit consists of 0.71 shares of Common Stock and 2.5
Common Stock Purchase Warrants having an exercise price of $6.00 per share,
representing a total of 240,000 Shares and 840,000 Warrants. In March 1996,
the Company completed two additional Private Placements, issuing a total of
768,000 shares of Common Stock and 216,500 Warrants. These separate offerings
yielded net cash proceeds of $5,156,000. The completion of the Private
Placements provided the Company with

19
<PAGE> 25

initial capital necessary (i) for the construction of a building and related
facilities in Scotland, (ii) for the purchase of equipment at the Company's
Scottish facilities, (iii) to provide a minimum royalty to the Company's
affiliate, VTI ($2,000,000) and (iv) to expand the number of employees of VEL.
However, the Company will require additional financing to engage in clinical
trials for the purpose of obtaining EU approval for the Product. The entire
process of research, development and EU regulatory approvals (if obtained), of
a new pharmaceutical product takes several years and requires substantial
funding. Pursuant to its Licensing Agreement with SNBTS, the Company and SNBTS
intend to commence EU clinical trials in the first calendar quarter of 1997.
The Company's present focus is the distribution, manufacture and continued
research and development of the Company's Product for the treatment of Multiple
Sclerosis, Hepatitis B and C, and HIV/AIDS.

Following the receipt of additional funding from the Company's Private
Placement completed in March 1996, research efforts commenced and related costs
were incurred which can be expected to increase as the Company continues its
development efforts for its proprietary production technology for its product.
While limited, to the extent that sales revenues exceed the related costs of
such sales, gross profits, if any, would be available to augment funds
available for research and development costs as well as offset selling general
and administrative expenses.

In June 1996, the Company executed a lease agreement in a
biotechnology park in the Edinburgh area of Scotland. This facility, comprised
of approximately 7,000 sq. ft., will contain the Company's laboratory and
production facilities. This location will augment other productive assets
located within the SNBTS facility which are available to the Company under the
Scottish Agreement.

Current period expenses consisted mainly of management consulting fees
of $49,000, legal fees of $94,000 and travel expenses of $27,000.

Management believes that the working capital currently on-hand is
adequate to complete the planned construction phase of its Edinburgh production
facility and maintain its research and product development operations at least
through March 31, 1997. Additional funding will be required, as indicated to
undertake EU regulatory approvals.

REPLACEMENT OF INDEPENDENT AUDITORS

On June 18, 1996, Cogen Sklar, LLP was replaced as the Company's
auditors, based on the Company's intention to retain the same audit firm as its
parent, Viragen, Inc. During the two most recent fiscal years and interim
period subsequent to June 30, 1995, there have been no disagreements with Cogen
Sklar LLP (year ended June 30, 1995 and

20
<PAGE> 26

interim subsequent period) or Grant Thornton (year ended June 30, 1994) on any
matter of accounting principals or practices, financial statement disclosure,
or auditing scope or procedure or any reportable events. The reports of Cogen
Sklar, LLP for June 30, 1995 and Grant Thornton for June 30, 1994 did not
contain an adverse opinion, disclaimer of opinion, qualification, or
modification as to audit scope or accounting principles; however, due to a lack
of operations at that time, these opinions did contain a reference to a
substantial doubt about the Company's ability to continue as a going concern.

On June 18, 1996, the Board of Directors of the Company appointed
Ernst & Young LLP as independent auditors of the Company for the fiscal year
ended June 30, 1996.

BUSINESS
GENERAL

Viragen (Europe) Ltd., a Delaware corporation, was organized in
November 1985 (formerly "Action Associates, Inc.," and thereafter, "SRSI
Capital Group, Inc.", and "Sector Associates, Ltd.," respectively) to initially
seek business opportunities offering a potential for profit including the
acquisition of existing businesses or the acquisition of assets sufficient to
establish an active business for the Company. Through a license granted in
July 1995 to the Company's wholly-owned subsidiary, Viragen (Scotland) Limited
by Viragen Technology, Inc., a wholly-owned subsidiary of Viragen, Inc., the
majority stockholder of the Company, VSL secured certain exclusive rights
applicable to the EU and certain non-exclusive rights throughout the world (but
specifically excluding the United States and its territories). Pursuant to
such license, VSL is authorized to engage in the research, development,
manufacture and sale of certain immunological products for commercial
applications, particularly human leukocyte interferon including Omniferon(TM),
Viragen's natural human leukocyte interferon product, for antiviral and
therapeutic applications and as anticancer agents. Natural Interferon is a
protein substance that inhibits malignant cell growth without materially
interfering with normal cells. Natural Interferon stimulates and modulates the
human immune system and, in addition, impedes the growth and propagation of
various viruses. The Product is a natural product produced from human white
blood cells. Omniferon(TM) is the trade name for the Product in injectable
form. The Product has not been approved by any European Union governmental or
regulatory agencies nor by the United States Food and Drug Administration, and
there can be no assurances that such approvals of the Product will be obtained
at any time in the future.

The Company intends to seek to obtain EU approvals for various uses of
the Product in the future. Such approvals are expected to require several
years of clinical trials and substantial additional funding. The Company
expects to concentrate its efforts in preparing,

21
<PAGE> 27

filing and processing its applications and obtaining necessary approvals for
its Product from the EU regulatory authorities. Viragen has assembled an
advisory committee consisting of scientists, medical researchers and clinicians
to assist Viragen and any of its affiliates in regulatory compliance matters
and its applications to the EU regulatory authorities.

BACKGROUND

Organized on November 4, 1985, the Company's purpose was to seek
business opportunities. Following a brief ownership of South Richmond
Securities, Inc. in 1986, the Company commenced active business operations in
1987 upon the acquisition of ToSi, Inc. ("ToSi"). From 1987 until January
1993, through its ToSi subsidiary, the Company operated a number of retail
furniture stores in the South Florida region that featured Thomasville(TM)
(residential) furniture. The operations of ToSi, however, were characterized
by recurring losses and by January 1993, the Company was compelled to abandon
the business, discontinue its operations and close all of its remaining retail
operations. In November 1993, an affiliate of the Company's then principal
stockholder acquired 100% of ToSi in consideration for agreeing to indemnify
the Company against certain outstanding liabilities of ToSi. This was
completed in conjunction with a broad-based reorganization of the Company's
outstanding finances and recapitalization that occurred during November 1993.
From March 1993 until June 1993, the Company also briefly engaged in the
printing and graphic arts business following the acquisition of Drew
Communications Group, Inc.

Between 1993 and 1995 the Company went through a series of corporate
reorganizations and related equity transactions in an effort to establish a
viable operating component on which to base future expansion. In December
1995, a 94% equity interest in the Company was acquired by Viragen through a
reverse acquisition with Viragen's then wholly-owned subsidiary, VSL.

RECENT DEVELOPMENTS AND CHANGE OF CONTROL

On September 20, 1995, the Company (whose corporate name was then
"Sector Associates, Ltd.") entered into an Agreement and Plan of Reorganization
(the "Reorganization Agreement") to acquire 100% of the outstanding stock of
VSL, a Scottish private company organized in 1995, in exchange for the
distribution to Viragen, of newly issued shares of Convertible Preferred Stock
of the Company, (representing approximately 94% of the then issued and
outstanding capital stock interest of the Company), in a reverse acquisition
transaction.

On November 7, 1995, the Reorganization Agreement was amended to (i)
extend the closing date, (ii) provide for an interim loan of $500,000 to VSL
(which was deemed satisfied at closing), and (iii) provide for an additional
cash capital contribution into Sector prior

22
<PAGE> 28

to closing. On December 8, 1995, the consummation of the transactions
contemplated by the Reorganization Agreement, as amended, occurred. 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 Treasurer of the Company, but
continued as a Director of the Company until January 8, 1996.

OPERATIONS

The recent capital investments through a series of private placements
provided the Company with the capital necessary (i) for the construction of a
building and related facilities in Scotland, (ii) the purchase of equipment at
the Company's Scottish facilities, and (iii) to provide a minimum royalty to
the Company's affiliate, VTI ($2,000,000). However, the Company will require
additional financing to engage in clinical trials for the purpose of obtaining
EU approval for the Product. Clinical testing toward EU approval is an
expensive process which is expected to take several years to accomplish with no
assurance such approval would eventually be obtained.

THE LICENSE AGREEMENTS

Through a license granted on July 12, 1995 by Viragen Technology,
Inc., VSL secured certain exclusive rights applicable to the EU countries and
non-exclusive rights throughout the world (excluding the United States and its
territories) to engage in the research, development and manufacture of certain
proprietary products and technologies relating to the therapeutic application
of human leukocyte interferon. The term of the license is for 15 years, which
is automatically renewed for successive 15 year periods.

On July 20, 1995, VSL entered into a License and Manufacturing
Agreement (the "Scottish Agreement") with the Common Services Agency of
Scotland, an agency acting on behalf of the Scottish National Blood Transfusion
Service pursuant to which SNBTS, on behalf of VSL, will manufacture VSL's
natural human interferon product for exclusive

23
<PAGE> 29

distribution within the EU and non-exclusively worldwide (excluding the United
States and its territories) in return for certain royalties and preferential
access to the drug for Scottish patients at a preferential price.

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

Pursuant to the Scottish Agreement, VSL and VTI will provide SNBTS
with full access to the proprietary technology and specialized equipment,
provide suitable training to SNBTS' personnel and defray costs associated with
securing permits and regulatory approvals, and augmenting SNBTS facilities, as
necessary, to manufacture the Product within EU regulatory guidelines. SNBTS
will receive compensation for Products manufactured for use in clinical trials
in the EU, for Products manufactured for sales prior to obtaining new drug
application approval, and for sales following such approval, at varying
percentages in relation to manufacturing costs. Products manufactured and
utilized for humanitarian purposes or for medical use by Scottish patients will
be preferentially priced under a specific allocation to be agreed upon. See
also "Intellectual Property."

CLINICAL TRIALS

In order to commence clinical trials, the Scottish manufacturing
facility, method and techniques of manufacture, as delineated in Standard
Operating Procedures ("SOPS") and parameters of the trials themselves, must be
approved by EU regulatory authorities. Viragen, on behalf of the Company and
VSL, has engaged recognized consultants familiar with the EU approval process.
SNBTS will provide its best efforts, working in conjunction with the Company,
to obtain a United Kingdom current Good Manufacturing Practices ("cGMPs")
manufacturing license and subsequent product approval. At such time as the
SNBTS obtains a manufacturing license for the Product, Viragen may then seek
U.S. FDA manufacturing approval of the Scottish manufacturing facility. There
can be no assurance or guarantee that the EU regulators will approve the
manufacturing facility or permit clinical testing and distribution of the
Product within the EU, or that the FDA will license or approve the Scottish
manufacturing facility or Viragen's Product for clinical trials and subsequent
distribution in the United States.

THE PRODUCT

Since its incorporation, Viragen has focused its efforts on the
research and potential commercial applications of human leukocyte
interferon-alpha. Natural interferon is one of the body's natural

24
<PAGE> 30

defensive responses to foreign substances such as viruses, and is so named
because it "interferes" with viral growth. Interferon consists of protein
molecules that induce antiviral, antitumor and immunomodulatory responses
within the body. Medical studies have indicated that interferons may inhibit
malignant cell and tumor growth without affecting normal cell activity.

There are two basic types of interferon-alpha, differentiated
primarily by their method of manufacture and resultant composition. The first,
as produced by Viragen, is natural, human leukocyte alpha interferon ("Natural
Interferon") produced by stimulated human white blood cells. The human white
blood cells are cultivated and stimulated by the introduction of a stimulating
virus that induces the cells to produce Natural Interferon which contain
multiple subtypes. The Natural Interferon is then extracted and purified by
chemical filtration processes to produce a highly concentrated product for
clinical use. The second, recombination alpha interferon, is a genetically
engineered synthetic interferon produced by recombinant DNA techniques
("Synthetic Interferon") which contains a single subtype.

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

THE INDUSTRY

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

25
<PAGE> 31

availability and substantially lower unit cost compared to Natural Interferon.

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

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

MANUFACTURE OF INTERFERON

Human source leukocytes ("white blood cells") and a stimulating virus,
raw materials which are readily available to the Company, are needed to produce
human leukocyte interferon by conventional (non-recombinant) means. A
stimulating virus, harmless to humans, is introduced into the white blood cell
which induces the cell to produce interferon. The interferon is extracted and
purified by chemical and mechanical filtration processes. The Product, which
is a natural human leukocyte interferon-alpha in injectable form, is
distributed in limited quantities in Florida under the name Alpha Leukoferon
(TM). In addition, the Company has a second variant of the product in
development for the commencement of clinical trials under the name
Omniferon(TM).

Production methods developed by Viragen, as well as enhanced methods
currently under development, have reduced both Viragen's and the Company's
costs of production of Natural Interferon, and accordingly, the differences in
market price between the natural and synthetic interferons. While production
of the natural product is still believed to be somewhat more costly on a per
unit basis, Viragen and the Company believe that lower dosage requirements for
the Natural Interferon make it presently a cost effective alternative method of
treatment. The Company anticipates that it will initially be required to make
capital expenditures of between $1,100,000 and

26
<PAGE> 32

$1,500,000 in order to refine, acquire and install new manufacturing equipment
associated with its proprietary manufacturing process at its new Scottish
facility. The Company believes that the new proprietary manufacturing
technology licensed by VTI should significantly reduce the cost of production
which, in turn, will further reduce the price of the Product, thereby enabling
it to be more competitive with Synthetic Interferons. There can be no
assurances that such new manufacturing technology will enable the Company to
achieve the level of manufacturing proficiency and Product improvement
anticipated by management.

RESEARCH AND DEVELOPMENT

The entire process of research, development and EU regulatory
approvals (if obtained), of a new pharmaceutical product will take several
years and require substantial funding. Pursuant to its Licensing Agreement
with SNBTS, the Company and SNBTS intend to commence EU clinical trials in the
first calendar quarter of 1997. The Company's present focus is the
distribution, manufacture and continued research and development of
Omniferon(TM) for the treatment of Multiple Sclerosis, Hepatitis B and C, and
HIV/AIDS.

Following the receipt of additional funding from the Company's Private
Placements completed in March 1996, research efforts and related costs
increased further and can be expected to continue to increase as the Company
continues its development efforts for its proprietary production technology for
its product. While limited, to the extent that sales revenues exceed the
related costs of such sales, gross profits, if any, would be available to
augment funds available for research and development costs as well as offset
selling general and administrative expenses.

INTELLECTUAL PROPERTY

Viragen has been awarded one patent for an enhanced purification
process. However, Viragen has recently made substantial advances in its
technology but has not, as yet, applied for patent protection for its new
technology and is currently relying on protection through trade secret laws and
confidentiality agreements until such time it does file for patent protection.
In July 1995, all of the patents and proprietary technology owned by Viragen
was subsequently transferred to its wholly-owned subsidiary, Viragen
Technology, Inc.

United States patents have been issued to others with respect to
genetically engineered organisms and genes and human leukocyte interferon
purified to a certain degree. Subject to the extent of such existing patent
claims, Viragen may have to negotiate license agreements with such patent
holders to use such processes and products in Viragen's human leukocyte
interferon program. As a result, the Company may be required to become a party
in these license agreements which could have an adverse effect on the Company's
profitability

27
<PAGE> 33

since it is likely that the Company would be required to pay cash compensation
or royalties.

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

While Viragen has made efforts to protect its proprietary technology,
to the extent that such protections are inadequate, Viragen could lose the
benefit of a part or all of these rights, which, in turn, could have a material
adverse effect on the Company. Furthermore, to the extent that any of Viragen's
patents or other proprietary technology is challenged or infringed, such
challenges or infringement will likely have an adverse effect on the Company's
License Agreement with VTI and the Company's Scottish Agreement with the Agency
and SNBTS, as well as on the Company's operations. See "Licensing Agreements."

REGULATION

In accordance with EU regulations, the Product is classified as a
"protein identical to naturally occurring human polypeptides and proteins".
The EU regulations specifically provide for a more abbreviated amount of
preclinical studies for naturally occurring substances such as the Product than
for genetically engineered products. Accordingly, while there can be no
assurance, the Company hopes to receive a more expeditious review of the
various EU processes and clinical trials prerequisite to market approval.

As described above, for purposes of securing approvals and completing
the necessary clinical trials relative to the EU approval process, as well as
to secure a sufficient blood source for the manufacture of the Product
following completion of EU trials, on July 20, 1995, VSL entered into the
Scottish Agreement with the Common Services Agency of Scotland, an adjunct of
the Scottish Government which acts on behalf of the National Health Service in
Scotland and the Scottish Natural Blood Transfusion Service. The Agency owns
and operates a blood fractionation facility in Edinburgh, Scotland, and has the
physical and, with the Company's proprietary technology, the technical capacity
to manufacture Omniferon(TM) from human leukocytes. Securing a facility in the
EU which has available a sufficient qualified blood source was critical for the
Company to conduct EU clinical trials as well as for subsequent commercial
manufacturing.

28
<PAGE> 34

In order to conduct clinical trials, the Scottish manufacturing plant
and manufacturing Standard Operating Procedures ("SOPs") must be approved by
the Scottish regulatory authorities. The Company has engaged a recognized
consultant familiar with the EU regulatory process to assist in the
manufacturing and Product submissions prerequisite to the EU regulatory
approval process. In addition, the SNBTS has a full time regulatory
department, comprising the three persons, that have obtained approval of
numerous EU approved blood-derived products. The Scottish National Blood
Service will provide its best efforts, working in conjunction with the Company,
to obtain a manufacturing license and subsequent product approval at the
conclusion of the EU clinical studies. At such time as SNBTS obtains a
manufacturing license for the Product, Viragen also intends to seek U.S. FDA
approval of the Product for clinical trials in the United States.

Pursuant to the Scottish Agreement, the Agency has committed to
manufacture and supply the Product within the EU on an exclusive basis and
throughout the world (excluding the United States and its territories) on a
non-exclusive basis. The Agency has committed to manufacture the Product in
sufficient scale to accommodate the EU clinical trials, and thereafter, for
subsequent commercial sales in amounts to be agreed upon by the parties.

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

COMPETITION

Competition in the immunological and pharmaceutical products industry
is intense. Competitors include major pharmaceutical, chemical, energy and
food companies, some of which have already marketed genetically engineered
alpha and beta interferon products for Multiple Sclerosis, cancer and viral
treatments, and many of which are expanding into modern biotechnology.
Competition is expected to increase in the future, based upon the perceived
potential commercial applications for such products. Many of the Company's
competitors have existing programs, more experience in research, development
and clinical testing of pharmaceutical

29
<PAGE> 35

products, and substantially greater financial, marketing and human resources
than the Company.

EMPLOYEES

As of June 12, 1996, the Company has one full-time employee, who is
Managing Director of VSL. As of July 1, 1996, Mr. Dennis Healey, the Company's
Executive Vice President, Chief Financial Officer, Treasurer and Secretary will
also become an employee of the Company. Through the Scottish Agreement,
additional personnel will be available to the Company on an as needed
consulting basis.

PROPERTIES

Viragen, Inc., the majority stockholder of the Company, currently owns
a 14,000 square foot building at 2343 West 76th Street, Hialeah, Florida.

In June 1996, the Company executed a five-year lease agreement in a
biotechnology park in the Edinburgh area of Scotland. This facility, comprised
of approximately 8,100 sq. ft., will contain the Company's laboratory and
production facilities. This location will augment other productive assets
located with the SNBTS facility which are available to the Company under the
Scottish Agreement. The monthly rental for the facility is British Pound 5,590
or approximately U.S. $8,830, subject to adjustment for common area maintenance
charges. The Company has the right to renew the lease for four additional
five-year terms, with increments at the conclusion of each five-year term. The
Company considers that its property, including its new facility under
construction, is suitable and adequate to carry on the Company's business. The
Company further believes that it maintains sufficient insurance coverage on the
Company's real and personal property.

LEGAL PROCEEDINGS

An action is pending in the Circuit Court for Broward County, Florida
against the Company (then named Sector Associates, Ltd.) alleging that Sector
Associates, Ltd. mishandled payment of amounts due to a Roy Woods, a secured
creditor (ROY WOODS AS TRUSTEE V. SECTOR ASSOCIATES LTD.). The Company has
denied the claim and has filed a counterclaim. In addition, a stockholder
of Sector Associates, Ltd. is obligated and has agreed to indemnify
the Company in this matter and has assumed responsibility for defense of this
lawsuit. Inasmuch as the Company is not directly defending the lawsuit,
management is not able to evaluate the outcome of this litigation. However,
based on the nature of the damages alleged as well as the indemnification
received from the stockholder defending the lawsuit, management does not
believe that the litigation will result in any material liability to the
Company.

30
<PAGE> 36

The Company knows of no other material litigation or claims pending,
threatened or contemplated to which the Company is or may become a party.

MANAGEMENT

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

<TABLE>
<CAPTION>
SERVED AS
POSITION WITH OFFICER AND/OR
NAME AGE THE COMPANY DIRECTOR SINCE
- ---- --- ----------- --------------
<S> <C> <C> <C>
Gerald Smith 65 Chairman of
the Board, 1995
Chief Executive
Officer 1995
Director of Viragen
(Scotland) Limited 1995

Robert Zeiger 52 Chief Executive Officer, 1996
Director of Viragen
(Scotland) Limited 1995

Dennis W. Healey 47 Executive Vice President, 1996
Chief Financial Officer
Treasurer, Secretary 1996
and Director 1996
Director of Viragen
(Scotland) Limited 1995

Dr. Magnus Nicolson 34 Managing Director of 1996
Viragen (Scotland) Ltd.
</TABLE>

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

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

GERALD SMITH, in accordance with reorganization by and among the
Company, Viragen, Inc., and Viragen (Scotland) Limited, became the President
and Chairman of the Board of Directors of the Company on December 8, 1995. Mr.
Smith has also served as a Director of Viragen (Scotland) Limited since its
inception in April 1995. Since February 5, 1993, Mr. Smith has served as a
Director of Viragen, Inc., the majority stockholder of the Company, and on May
12, 1993, Mr. Smith became President of Viragen. In June, 1994 Mr. Healey
relinquished his position as Chairman of the Board of Directors in favor of Mr.
Smith. Mr. Smith is also the Chairman of the Board, Chief Executive

31
<PAGE> 37

Officer and President of Cytoferon. Since 1982, he was a Principal
Stockholder, President, Chief Executive Officer and Director of Business
Development Corp. ("BDC") of Miami, Florida, which has served as a managing
entity and consultant to several high technology ventures including Compupix
Technology Joint Venture of Boca Raton, Florida. In 1988, Mr. Smith was the
Founder, President and a Director of Club-Theatre Network, Inc. of Boca Raton,
Florida, an audience-interactive private video theater. Mr. Smith sold his
interest in that company in March 1989. From August 1991 to December 1991, Mr.
Smith was the chief executive officer of Electronic Imagery, Inc. located in
Pompano, Florida, a company engaged in the development of imaging software. Mr.
Smith is also the President, Chief Executive Officer and a Director of
Cinescopic Corporation and International Database Service, Inc. located in Palm
Beach Gardens, Florida, computer-oriented companies which developed database
technology using the personal computer for audio, video, animation and real
time communication. Mr. Smith has wound down BDC's operations in order to
devote substantially all of his time to the Company. Mr. Smith has advised
that his services to these companies will not materially affect his ability to
render services to Cytoferon and the Company.

ROBERT ZEIGER was appointed a Director, Chief Executive Officer and
Chief Operating Officer of the Company in January, 1996. Mr. Zeiger has also
served as a Director of Viragen (Scotland) Limited, a wholly-owned subsidiary
of the Company since April, 1995 and a Director of Viragen, Inc., the majority
stockholder of the Company, since June, 1995. From 1985 to 1994, Mr. Zeiger
was employed by Glaxo, Inc., a pharmaceutical manufacturer during which time he
served as Vice President and General Manager, Glaxo Pharmaceuticals Division
(1991 to 1994), Vice President and General Manager of the Allen & Hanbury
Division, and Vice President and General Manager of the Dermatology Division
(1985 to 1988).

DENNIS W. HEALEY was appointed the Company's Executive Vice President,
Chief Financial Officer, Treasurer, Secretary and a Director of the Company in
January, 1996. Mr. Healey has also served as a Director of Viragen (Scotland)
Limited since April, 1995. In April 1993, he was appointed Chairman of the
Board and Chief Executive Officer of Viragen, Inc., the majority stockholder of
the Company, and in June 1994, Mr. Healey relinquished that position to Mr.
Smith and in July 1994 relinquished the position of Chief Executive Officer.
Upon Gerald Smith becoming President on May 12, 1993, Mr. Healey became
Executive Vice President and has served as Chief Financial Officer and
Treasurer of Viragen since 1980 and its Secretary since 1994. Mr. Healey,
Chief Financial Officer and Treasurer of Medicore, Inc., a publicly traded
company on the NASDAQ, and was appointed Executive Vice President of its
Techdyne affiliate in November 1991. Mr. Healey is a Certified Public
Accountant and joined Medicore in 1976 as its Controller. He is also Treasurer
of most of Medicore's subsidiaries and serves as Vice President of

32
<PAGE> 38

Dialysis Corporation of America ("DCA"), a subsidiary of Medicore, and
Secretary-Treasurer and Director of other DCA subsidiaries. Mr. Healey will
resign his positions with Medicore effective July 1996.

MAGNUS NICOLSON, Ph.D. has served as the Managing Director of Viragen
(Scotland) Limited, a wholly-owned subsidiary of the Company, since April 1995.
From 1992 to 1995, Dr. Nicolson was employed by Scottish Enterprise, an agency
of the Scottish government responsible for generating economic development in
Scotland. During his time at Scottish Enterprise, he served as Technology
Manager for "Locate in Scotland" (1995), Senior Executive (1993 to 1995), and
Contractor, Healthcare Liaison Office of Dunbartonshire Enterprise (1992 to
1993). From 1990 to 1992, Dr. Nicolson conducted various market research
projects for a variety of public and private enterprises, as an independent
marketing consultant. In 1988, Dr. Nicolson was awarded a Doctorate in
Immunology from the University of Strathclyde, in addition to acquiring Masters
Degrees in both Immunology and Business in 1985 and 1992, respectively. Dr.
Nicolson is a Fellow of the Royal Societies of Medicine and Chemistry, as well
as a Member of the Chartered Institute of Marketing.

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

EXECUTIVE COMPENSATION

During the past three fiscal years (1995, 1994, and 1993), none of the
Company's executive officers have received any cash compensation. Commencing
on July 1, 1996, Mr. Dennis Healey, the Company's Executive Vice President,
Chief Financial Officer, Treasurer, and Secretary, and a Director will receive
an annual salary of $85,000 pursuant to a two-year agreement with the Company.

Summary Compensation Table

<TABLE>
<CAPTION>
All
Name and Annual Restricted Other
Principal Compen Stock Options/ LTIP Compen-
Position Year Salary Bonus sation Award SARs(#) Payouts sation
- -------- ---- ------ ----- ------ ----- ------- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Gerald Smith, 1995 $ 0 $ 0 $ 0 0 0 0 0
Chairman of Board 1994 $ 0 $ 0 $ 0 0 0 0 0
and President(1) 1993 $ 0 $ 0 $ 0 0 0 0 0

Anthony Panzo, 1995 $ 0 $ 0 $ 0 0 0 0 0
Chairman of Board 1994 $ 0 $ 0 $ 0 0 0 0 0
and President(2) 1993 $ 0 $ 0 $ 0 0 0 0 0
</TABLE>

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

(1) Mr. Smith became the Chairman of the Board, Chief Executive Officer,
President and a Director of the Company on December 8, 1995, pursuant to the
Company's Agreement and Plan of Reorganization ("Reorganization Agreement") by
and among the Company, Viragen, Inc., and Viragen (Scotland) Limited.

(2) Mr. Panzo resigned as the Company's Chairman of the Board, Chief
Executive Officer, President and a Director of the Company on December 8, 1995,
pursuant to the Company's Reorganization Agreement.

33
<PAGE> 39

OPTION GRANTS IN LAST FISCAL YEAR

The following table sets forth information with respect to the grant
of options to purchase shares of Common Stock during the fiscal year ended June
30, 1995 to each person named in the Summary Compensation Table. The exercise
price of each option is equal to the fair market value of a share of Common
Stock on the date of grant.

<TABLE>
<CAPTION>
Number of % of Total
Securities Options/SARs
Underlying Granted to Exercise or
Options/SARS Employees in Base Price Expiration
Name Granted(#) Fiscal Year ($/Share) Date
- ---- ---------- ----------- --------- ----------
<S> <C> <C> <C> <C>
Gerald Smith -- -- -- --
Anthony Panzo -- -- -- --
</TABLE>

Option Exercises and Holdings

The following table sets forth information with respect to the
exercise of options to purchase shares of Common Stock during the fiscal year
ended June 30, 1995 to each person named in the Summary Compensation Table and
the unexercised options held as of the end of the 1995 fiscal year:

Aggregated Option Exercises in Last Fiscal Year
and 1995 Fiscal Year End Option Values

Less Exercise Value of Unexercised
Value Realized In the Money
(Market Price) Number of Unexercised Options at FY-End (Based on
Shares at Exercise Less Options at FY-End FY-End Price of $0.66/Share
Acquired Exercise Price ---------------------------- ----------------------------
Name on Exercise Price Exercisable Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ----------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Gerald Smith - - - - - $ -

Dennis W. Healey - - - - - $ -
</TABLE>

Additional Stock Options

In November 1995, VSL, a wholly-owned subsidiary of the Company,
issued an aggregate of 7.144 shares of VSL common stock at $1.61 to
individuals now serving as officers and directors of the Company and to an
employee of Viragen, all of whom were expected to contribute to the operations
of VSL. In connection with the Agreement and Plan of Reorganization, these
options converted into the right to purchase an aggregate of 400,000 shares at
$.001 per share. Of these options, 100,000 were granted each to (i) Mr. Gerald
Smith, the current President and Chairman of the Company, (ii) Mr. Robert H.
Zeiger, the Chief Executive Officer, Chief Operating Officer, and a director of
the Company, (iii) Mr. Dennis W. Healey, the Company's Treasurer, Chief
Financial Officer, Secretary and a director of the Company, and (iv) to Mr.
Steven Sanders, an employee of Viragen, who provided various services to the
Company. All options were exercised on

34
<PAGE> 40

December 5, 1995 at $.001 per share. See "Principal Stockholders" and "Certain
Relationship and Related Transactions."

CERTAIN TRANSACTIONS

AGREEMENTS WITH CURRENT AFFILIATES OF THE COMPANY

On September 20, 1995, the Company entered into an Agreement and Plan
of Reorganization pursuant to which the Company agreed to acquire 100% of the
issued and outstanding stock of Viragen (Scotland) Limited, a Scottish private
company, in exchange for the distribution to Viragen, of newly-issued shares of
Convertible Preferred Stock that upon conversion represented 5,600,000 shares
of Common Stock of the Company or approximately 94% of the then outstanding
capital stock interest of the Company.

On November 7, 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 capital
contribution of $300,000, payable at closing. Upon the consummation of the
transactions contemplated by the Agreement and the Amendment in December 1995,
VSL became a wholly-owned subsidiary of the Company.

In July 1995, VSL entered into a License Agreement with Viragen
Technology, Inc., a wholly-owned subsidiary of Viragen. Pursuant to the terms
of the License Agreement, VSL is obligated to pay an initial royalty amount to
VTI of $2,000,000 and an annual royalty payment equal to the greater of (i)
$2,000,000 or (ii) 10% of VSL's gross revenues until such time as total royalty
payments of $18 million has been paid to VTI. Once the $18 million royalty
amount has been paid, VSL is obligated to pay VTI an amount equal to 8% of
VSL's gross revenues until such time as total royalty payments of $25 million
has been paid to VTI. Once the $25 million royalty amount has been paid, VSL
is obligated to pay VTI an amount equal to 5% of VSL's gross revenues
thereafter. The term of the license agreement is for the duration of the
intellectual property that is the subject matter of the agreement. See
"Business of the Company - Intellectual Property."

TRANSACTIONS WITH FAC ENTERPRISES, INC.

On November 3, 1995, FAC Enterprises, Inc. ("FAC") purchased 112,000
shares of Common Stock of the Company and Warrants to purchase 367,229 shares
of Common Stock for an aggregate purchase price of $350,000. An additional
128,000 shares of Common Stock and Warrants to purchase 472,771 shares of
Common Stock were acquired by other unrelated investors for a purchase price of
$400,000 to complete the transaction.

35
<PAGE> 41

FAC was instrumental in having identified, negotiated and facilitated
the Company's investment in The Eastwind Group, Inc. ("Eastwind"), a former
affiliated entity of the Company. Eastwind was the subject of a stock
disclosed by the Company in 1995. FAC entered into an Investment Banking
Agreement with Eastwind on January 25, 1995 in order to provide investment
banking and financial advisory services. Pursuant to the Investment Banking
Agreement, FAC received certain shares of Eastwind common stock and is entitled
to receive certain monthly fees payable by Eastwind. FAC is further entitled
to up to an additional 100,000 shares of common stock and 150,000 common stock
purchase warrants of Eastwind based upon events such as exercise of the
Company's warrants in Eastwind and FAC having been instrumental in securing or
facilitating further equity investments in Eastwind.

In December 1995, the Company issued 240,000 shares of its Common
Stock and Warrants to purchase up to 840,000 shares of its Common Stock at
$6.00 in consideration of $750,000 to three accredited investors in a private
placement of such securities undertaken pursuant to Regulation S (as to two of
the investors who are British Virgin Islands corporations) and Rule 505 of the
Regulation D and Section 4(6) of the Securities Act of 1933, as amended to FAC.
In December 1995, FAC also received 200,000 shares of Common Stock for services
performed in connection with the December 8, 1995 closing of the Agreement and
Plan of Reorganization by and among the Company, VSL and Viragen.

ACQUISITION AND DISPOSITION OF SUBSIDIARIES

On March 31, 1993, the Company acquired 100% of the common stock of
Drew, a Florida corporation, in exchange for 90,000 shares of the Company's
Common Stock which were placed in escrow. Subsequently, the Company commenced
legal action against the former owner of Drew for breach of contract, damages
and a rescission of the acquisition. In November 1993, the Company transferred
the Drew common stock to the former owners for indemnification of all
liabilities, suits, actions and judgments against the Company. In April 1994,
the former owners settled all litigation relating to the Drew acquisition and
since the 90,000 Company shares were returned to the Company as part of the
settlement, the Company returned the shares to the former owners who had
originally contributed them for the purpose of the acquisition.

In November 1993, the Company's then principal stockholder acquired
100% of the stock of ToSi from the Company. In return for the stockholder
assuming certain debt of ToSi, the Company assigned its assigned leaseholder
income to the stockholder conditioned upon the Company's securing relisting of
its outstanding common stock on the NASDAQ SmallCap Market Index. In July
1994, the Board of Directors of the Company waived all conditions to such
transfer and agreed to transfer the leasehold interest to the principal

36
<PAGE> 42

stockholder, effective of January 1, 1994. The stockholder agreed to indemnify
the Company of any claims resulting from ToSi.

LOAN TO FORMER PRINCIPAL STOCKHOLDER

On March 15, 1995, the Company made a loan to its then principal
stockholder in the amount of $50,000, at an interest rate of 9% per annum.
This amount was repaid on June 6, 1995, plus all accrued interest.

ARRANGEMENTS WITH THE COMPANY'S FORMER CHAIRMAN AND FORMER PRINCIPAL
STOCKHOLDER.

In conjunction with its reorganization during November 1993, the
Company also entered into a number of transactions with George Levin, its
former Chairman of the Board of Directors and former principal stockholder, as
follows: (i) Mr. Levin exchanged approximately $769,000 of indebtedness owed to
him by the Company in return for 15,694 newly issued shares of common stock;
(ii) the Company sold to an affiliate of Mr. Levin 100% of its interest in the
common stock of its former ToSi subsidiary and agreed to distribute to Mr.
Levin a certain leasehold interest (which effectively was assigned as of
January 1, 1994) in consideration for Mr. Levin's agreement to indemnify the
Company against certain liabilities of ToSi; and (iii) the Company sold to an
affiliate of Mr. Levin 100% of its interest in the common stock of its former
Drew subsidiary in consideration for Mr. Levin's agreement to indemnify the
Company against certain liabilities of Drew.

The assignment of the Company's leasehold interest to Mr. Levin was to
have occurred pursuant to the terms of an agreement in November 1993, once the
Company secured relisting of its securities on the NASDAQ SmallCap Market
System. However, the Company waived this condition to the transfer and agreed
to permit the assignment of the leasehold interest effective January 1, 1994.

CONSULTING SERVICES

During 1994, the Company paid a former significant stockholder
$105,000 for consulting services in connection with the Company's private
placements in November 1993.

ADVANCES AND FEES PAID TO FORMER PRINCIPAL STOCKHOLDER

During December 1993, the Company paid $105,000 to GRA Investments
Corp. for consulting services, structuring and providing financial advisory
services in connection with the Company's private placement transaction during
the fourth quarter of 1993. On March 15, 1995, the Company made a loan to GRA
Investments Corp. in the amount of $50,000, at an interest rate of 9% per
annum. This amount was repaid on June 6, 1995, together with interest.

37
<PAGE> 43

REPURCHASE OF CERTAIN SHARES OF AFFILIATES

During November 1994, the Company instituted the redemption and
repurchasing of 46,040 shares from stockholders who purchased shares in the
Company's November 1993 private placement at prices of $2.50 and $3.50. This
included the repurchase of 2,143 shares from an affiliate of GRA Investments
Corp. for $60,000. The Company also redeemed 5,714 shares that had been
purchased by Crawsfield Limited, then a principal stockholder of the Company,
at $1.50 per share for a price of $120,000.

TRANSACTIONS WITH FORMER PRINCIPAL STOCKHOLDERS

In November 1993, the Board of Directors of the Company approved the
issuance of 1,000,000 shares of the Company's Common Stock for 250,000 shares
of North American Technologies Group, Inc. ("NATK") and 35,000 shares of
Florida West Airlines, Inc. ("FWA"). During October 1994, certain of the
Company's principal stockholders agreed to surrender for cancellation shares of
the Common Stock in return for which the Company agreed to return to these
stockholders shares of the common stock of NATK and FWA that had been
originally contributed to the Company in conjunction with its November 1993
reorganization. In November 1994, the Board of Directors approved the return
of NATK and FWA stock in exchange for the Company's stock because certain
business transactions that were contemplated at the time of the original
transfer were not pursued. The Company returned 122,142 shares of NATK in
exchange for cancellation of 350,000 shares of the Company's Common Stock and
35,000 shares of FWA in exchange for cancellation of 25,000 shares of the
Company's Common Stock.

DIRECTORS AND EXECUTIVE OFFICERS AND PARENT COMPANY

Mr. Gerald Smith, the Company's President and Chairman, is also the
Chairman and President of Viragen, the majority stockholder of the Company.
Mr. Robert Zeiger, Chief Executive Officer and Chief Operating Officer and a
Director of the Company is also the Chief Executive Officer and Chief Operating
Officer and a Director of Viragen. Mr. Dennis Healey, the Company's Executive
Vice President, Chief Financial Officer, Treasurer, Secretary and a Director
also serves in the same capacities for Viragen. Viragen currently owns
5,000,000 shares of Common Stock of the Company, representing 72% of the
Company's outstanding capital stock interest.

CLINICAL ADVISORY COMMITTEE

Viragen, Inc., the majority stockholder of the Company, formed a
Clinical Advisory Committee in February 1995, comprised of scientists, medical
researchers and clinicians who have expertise primarily in areas of relevance
to Viragen's research and development activities, which also include the
research and development activities of the Company. All of the members of the
Clinical

38
<PAGE> 44

Advisory Committee have participated in a full day conference and program to
evaluate procedures and to recommend a course of action for obtaining EU (as
well as FDA) approvals of the Company's Natural Interferon product. The
program was held in February 1995 immediately following the organization of the
Clinical Advisory Committee. The Clinical Advisory Committee is expected to
assist Viragen and the Company in developing the medical, scientific and
clinical aspects of formal Multiple Sclerosis clinical protocols and trials for
its investigational, natural human interferon-alpha product. The Company
views this as its initial step towards seeking EU approvals of its Product.

KENNETH JOHNSON, M.D., who serves as Chairman of the Clinical Advisory
Committee, is Professor and Chairman of the Department of Neurology for the
University of Maryland School of Medicine. Among previous appointments, Dr.
Johnson has been Professor of Neurology at the University of California and
Associate Professor at Case Western Reserve University. Dr. Johnson is listed
in the publication "Best Doctors in America". He is currently on the Editorial
Board for the Archives of Neurology and the Journal of Neuroimmunology. Dr.
Johnson is an Ad Hoc reviewer for various medical journals including,
Neurology, Annals of Neurology, Annals of Internal Medicine, New England
Journal of Medicine, the American Journal of Virology as well as for other
publications. Dr. Johnson has lectured extensively on the subject of
Interferon therapy in Multiple Sclerosis as well as on Copolymer-I and Beta
Interferon. Dr. Johnson was a co-author in the Landmark 1983 medical article
on "New Diagnostic Criteria for Multiple Sclerosis" which became the seminal
source for diagnostic typing within Multiple Sclerosis. In addition, Dr.
Johnson has published in excess of twenty articles regarding the use of
Interferon in Multiple Sclerosis. Dr. Johnson has also received research
support from Schering Plough relative to a 1982-1985 trial of Alpha Interferon,
from the Kroc Foundation and from Sandoz Pharmaceutical for a 1981-1985 study
of cyclosporine therapy, from the Triton Viro Science Corporation for the study
of Beta Interferon and from the National Multiple Sclerosis Society for the
study of Copolymer-I.

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

39
<PAGE> 45

Tizanidine Study. Dr. Cohen is a frequent contributor to various publications
on the subject of Neurovirology.

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

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

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

40
<PAGE> 46

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

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

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

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

41
<PAGE> 47

PRINCIPAL STOCKHOLDERS

The following table sets forth certain information regarding the
Company's Common Stock beneficially owned at June 12, 1996 (i) by each person
who is known by the Company to own beneficially or exercise voting or
dispositive control over 5% or more of the Company's Common Stock, (ii) by each
of the Company's directors, and (iii) by all officers and directors as a group.
A person is deemed to be a beneficial owner of any securities of which the
person has the right to acquire beneficial ownership within sixty days. At
June 12, 1996, there were 6,922,830 shares of Common Stock of the Company
outstanding.

<TABLE>
<CAPTION>
Amount
Nature of Percent
Name and Address Beneficial of
of Beneficial Owner Ownership (1) Class (2)
------------------- ------------- ---------
<S> <C> <C>
Gerald Smith(3) 100,000 1.4%

Robert Zeiger(4) 100,000 1.4%

Dennis W. Healey(5) 100,000 1.4%

Viragen, Inc.(6) 5,000,000 72%

Officers and Directors
as a Group (3 persons) 300,000 4.3%
</TABLE>

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

(1) Based upon information furnished to the Company by the principal
security holders or obtained from the stock transfer books of the Company.
Other than indicated in the notes, the Company has been informed that such
persons have sole voting and dispositive power with respect to their shares.
All of the individuals listed are officers and/or directors of the Company
whose address is 2343 West 76th Street, Hialeah, Florida 33016, which is also
the address of Viragen, Inc.

(2) Based on 6,922,830 shares of Common Stock outstanding at June 12,
1996.

(3) Mr. Smith is President and Chairman of the Board of Directors of the
Company.

(4) Mr. Zeiger is Chief Executive Officer, Chief Operating Officer and a
Director of the Company.

(5) Mr. Healey is Executive Vice President, Treasurer, Chief Financial
Officer, Secretary and a Director of the Company.

42
<PAGE> 48

(6) Viragen, Inc. is the majority stockholder of the Company.

SALES BY SELLING SECURITY HOLDERS

The following table sets forth the name of each Selling Security
Holder, the amount of shares of Common Stock held directly or indirectly by
each holder on June 12, 1996, the amount of shares of Common Stock to be
offered by each such holder, the amount of Common Stock to be owned by each
such holder following sale of such shares of Common Stock and the percentage of
shares of Common Stock to be owned by each such holder following completion of
such offering. On June 12, 1996, there were 6,922,830 shares of Common Stock
of the Company outstanding.

<TABLE>
<CAPTION>
Shares to Percentage
Number Shares be Owned to be
Name of Selling of Shares to be After Owned After
Security Holder Owned Offered Offering Offering(1)
- --------------- --------- ------- ---------- -----------
<S> <C> <C> <C> <C>
Adams, Leonard J.(4) 6,000 6,000 0 -
Adelstein, Philip &
Esther 2,500 2,500 0 -
American & International
Investment Ltd.(4) 18,000 18,000 0 -
Appel, Gerald R. 3,300 3,300 0 -
Asher, D.S.(4) 6,000 6,000 0 -
Atlantic Partners 4,000 4,000 0 -
Barbera, Joseph(2) 8,000 8,000 0 -
The Bank of Bermuda,
Ltd. 35,000 35,000 0 -
Bass, Myles 100,000 100,000 0 -
Beni, Allen & Debbi(4) 12,000 12,000 0 -
Bernard Hollander
Family Trust 10,000 10,000 0 -
Borenstein, Shari &
Lawrence(2) 16,000 16,000 0 -
Borrelli, Edward 5,500 5,500 0 -
Brennan, Quinn(4) 6,000 6,000 0 -
BS Jr. Corporation(2) 150,000 150,000 0 -
Campbell, Brahm L.(4) 12,000 12,000 0 -
Cardillo, Craig(4) 3,000 3,000 0 -
Carter, Lisa c/f Amanda Carter 1,200 1,200 0 -
Carter, Lisa c/f Nicola Carter 3,800 3,800 0 -
Chicago Chesed Fund 6,000 6,000 0 -
Christine Hassuck Revocable
Trust UADTD 12/4/85 2,200 2,200 0 -
Cohen, Bernard 4,000 4,000 0 -
Cohen, Bernard 10,000 10,000 0 -
Cranbourne Investments,
Inc.(2)(3) 53,500 53,500 0 -
Dunedin, Inc.(4) 6,000 6,000 0 -
Diamond Import Group,
Inc.(4) 11,000 11,000 0 -
Digestive Liver
Diseases, Inc. 18,000 18,000 0 -
Diversified Investment
Fund, L.P.(3) 144,138 144,138 0 -
Dunlap, James 5,000 5,000 0 -
Dutton, Donnie M. 16,000 16,000 0 -
Dutton, Mark E. 32,000 32,000 0 -
EBC Zurich AG 20,000 20,000 0 -
</TABLE>

43
<PAGE> 49

<TABLE>
<CAPTION>
Shares to Percentage
Number Shares be Owned to be
Name of Selling of Shares to be After Owned After
Security Holder Owned Offered Offering Offering(1)
- --------------- --------- ------- ---------- -----------
<S> <C> <C> <C> <C>
FAC Enterprises, Inc.(3) 388,454 388,454 0 -
Fleming, John & Leigh(4) 6,000 6,000 0 -
Friedman, Richard(4) 6,000 6,000 0 -
Friedman, Stanley N.
& Leslie(4) 12,000 12,000 0 -
Fried, David(4) 3,000 3,000 0 -
Gallo, Michael(4) 6,000 6,000 0 -
Garnick, Richard 3,000 3,000 0 -
Generation Skipping
Trust(4) 6,000 6,000 0 -
Genzardi, Joseph(4) 3,000 3,000 0 -
Gesoff, Irving & Lydia 3,000 3,000 0 -
Ginsburg, Bruce 6,000 6,000 0 -
Glicker, Harvey 13,000 13,000 0 -
Glickman, Morton G.(4) 6,000 6,000 0 -
Goodman, John(4) 12,000 12,000 0 -
Groffman, Ross D. 1,000 1,000 0 -
Heller, Barry J.(4) 6,000 6,000 0 -
Henderson, Paul 2,000 2,000 0 -
Herrick, Norton 20,000 20,000 0 -
HK Investment Partners,
L.P. 10,000 10,000 0 -
Hodas, Martin(4) 6,000 6,000 0 -
HST Partners 20,000 20,000 0 -
H&Q Fonder Ltd.(4) 90,000 90,000 0 -
Ibsen Imports 30,000 30,000 0 -
Infinite Specialties 2,000 2,000 0 -
Interbanc Mortage
Services, Inc. 13,000 13,000 0 -
JeMJ Financial Services,
Inc. 20,000 20,000 0 -
Josephart, Herbert 4,000 4,000 0 -
Jost, Brian 6,000 6,000 0 -
KAB Investments, Inc.(2)(3) 236,000 236,000 0 -
Kalenberg, Jeffrey 15,000 15,000 0 -
Katherine Tate Overton Trust
dtd 10/14/93,
Katherine Coady, TTE 4,000 4,000 0 -
Katz Imports, Inc.(4) 6,000 6,000 0 -
Keller, Matthew 3,000 3,000 0 -
Knight, George E. 5,000 5,000 0 -
Kosimor, James J.(4) 6,000 6,000 0 -
Lackey, Mary & Shawn(4) 30,000 30,000 0 -
Lackey, Stanley C.(4) 30,000 30,000 0 -
Laterza, Joseph A.(4) 6,000 6,000 0 -
Lonergan, Tod D. 1,000 1,000 0 -
Markowitz, Jeffrey(4) 6,000 6,000 0 -
Martin Koutcher Pension
Trust 15,000 15,000 0 -
Mermelstein, Henry 5,000 5,000 0 -
Mermelstein, Joseph 5,000 5,000 0 -
Mermelstein, Marvin 10,000 10,000 0 -
Obelisk Group, L.L.C. 2,000 2,000 0 -
Oracle Management
Limited(4) 96,000 96,000 0 -
Parikh, Renu D. Money
Purchase Pension Plan(4) 12,000 12,000 0 -
Rajchenbach Family Trust 10,000 10,000 0 -
</TABLE>

44
<PAGE> 50

<TABLE>
<CAPTION>
Shares to Percentage
Number Shares be Owned to be
Name of Selling of Shares to be After Owned After
Security Holder Owned Offered Offering Offering(1)
- --------------- --------- ------- ---------- -----------
<S> <C> <C> <C> <C>
Rehcam Investment L.P.(4) 6,000 6,000 0 -
Romano, Ginia(2) 28,000 28,000 0 -
Rome, Joseph 1,300 1,300 0 -
Rosenberg, Bernard 6,000 6,000 0 -
Rosenberg, David(4) 6,000 6,000 0 -
Rosner, Steven B.(3) 104,000 104,000 0 -
Rozel International
Holdings, Inc.(2)(3) 332,662 332,662 0 -
Rubin, Nicole & Michael(4) 6,000 6,000 0 -
Rutta, Richard(4) 6,000 6,000 0 -
R&M Development
Associates(4) 1,500 1,500 0 -
Sabella, Angela Chen(4) 18,000 18,000 0 -
Sachs, Irving & Selma 3,000 3,000 0 -
Saker, Wayne(4) 6,000 6,000 0 -
Salvani Investments,
Inc.(2) 80,000 80,000 0 -
Salvani, Joseph(4) 12,000 12,000 0 -
Sanders, Steven 100,000 100,000 0 -
Schabes, Maruicio(4) 6,000 6,000 0 -
Schnell, David(4) 12,000 12,000 0 -
Shaw, Gary 4,000 4,000 0 -
Shear, Ronald(4) 9,000 9,000 0 -
Simone Group Ltd.(4) 60,000 60,000 0 -
SLD Capital Corp.(2) 75,000 75,000 0 -
Spartan Establishment(4) 18,000 18,000 0 -
SPH Investments Inc.
Profit Sharing Plan 25,000 25,000 0 -
SPH Investments, Inc.(2(3) 41,000 41,000 0 -
Stephens, Greg 4,000 4,000 0 -
Stremgren, John(4) 6,000 6,000 0 -
Tang, Anthony(4) 18,000 18,000 0 -
Walters, Vicki 1,400 1,400 0 -
Ward, Charles L. 4,000 4,000 0 -
Weinstein, Nathan P.
& Paula 1,000 1,000 0 -
Weston Partners 2,000 2,000 0 -
Weston Partners
Profit Sharing Plan
f/b/o Gerald R. Appel 2,000 2,000 0 -
Whaley, Walker 5,000 5,000 0 -
Wind River Partners,
L.P.(4) 12,000 12,000 0 -
Wirth, James 3,000 3,000 0 -
--------- ---------

2,961,454 2,961,454
========= =========
</TABLE>

(1) Based on 6,922,830 shares of Common Stock outstanding
(2) Includes Warrants to purchase shares of Common Stock at $8.00.
(3) Includes Warrants to purchase shares of Common Stock at $6.00.
(4) Includes Warrants to purchase shares of Common Stock at $12.00.

Pursuant to an agreement dated November 7, 1995 between Viragen, Inc.,
and FAC Enterprises, Inc., FAC provided certain advisory

45
<PAGE> 51

services to Viragen in connection with reverse acquisition of the Company that
was consummated on December 8, 1995 between Viragen, the Company, and VSL. As
compensation for its services, FAC received 200,000 shares of Common Stock of
the Company from Viragen. The compensation issued to FAC was the result of
arms-length bargaining and represented 3% of the outstanding stock of the
Company as of December 8, 1995. All of the aforementioned shares of Common
Stock listed above are to be sold by FAC. See "Certain Transactions."

In November 1995, the Company completed a $750,000 private placement
unit offering to accredited investors at $2.23 a unit, resulting in the
issuance of 240,000 shares of its Common Stock and Warrants to purchase 840,000
shares of Common Stock at $6.00 per share. All of the shares of Common Stock
included in the private offering and underlying the aforementioned Warrants are
included in the shares of Common Stock listed above to be sold by the Selling
Security Holders.

In March, 1996, the Company completed two private placements totalling
$5,470,000 to accredited investors, resulting in the issuance of 335,000 shares
of Common Stock at $6.00 and 433,000 units at $8.00 per unit, each unit
consisting of one share of Common Stock and one-half of a Warrant to purchase
Common Stock at $12.00 a share. In addition, the participating investment bank
received 195,000 shares and 450,000 Warrants to purchase Common Stock at $8.00
per share. All of the shares of Common Stock included in the private offering
and underlying the aforementioned Warrants are included in the shares of
Common Stock listed above to be sold by the Selling Security Holders.
See previous discussion under "Management's Discussion and Analysis or Plan of
Operations."

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

46
<PAGE> 52

DESCRIPTION OF SECURITIES

The Company is currently authorized to issue up to 20,000,000 shares
of Common Stock, par value $.01 per share, of which 6,922,830 shares were
outstanding as of June 12, 1996. The Company is also authorized to issue up to
2,500,000 shares of Preferred Stock, par value $.01 per share, none of which
were issued or outstanding as of June 12, 1996.

COMMON STOCK

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

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

PREFERRED STOCK

The Company is authorized to issue 2,500,000 shares of Preferred
Stock, par value $.01 per share. While the Company has previously designated
Series A Preferred Stock and Series B Preferred Stock, none are currently
issued or outstanding. The Preferred Stock may be issued by resolutions of the
Company's Board of Directors from time to time without any action of the
stockholders. Such resolutions may authorize issuances of such Preferred Stock
in one or more series and may fix and determine dividend and liquidation
preferences, voting rights, conversion privileges, redemption terms and other
privileges and rights of the shares of each authorized series. The Company has
no present intention to issue any additional shares of its Preferred Stock for
any purpose. While the Company includes such Preferred Stock in its
capitalization in order to enhance its financial flexibility, such Preferred
Stock could possibly be used by the Company as a means to preserve control by
present management in the event of a potential hostile takeover of the Company.
In addition, the issuance of large blocks of Preferred Stock could possibly
have

47
<PAGE> 53

a dilutive effect with respect to the existing holders of Common Stock of the
Company.

COMMON STOCK PURCHASE WARRANTS

In connection with the completion of the Company's $750,000 private
placement offering in December 1995, the Company issued Common Stock Purchase
Warrants to purchase 840,000 shares of Common Stock. These warrants are
exercisable at $6.00 per share on or prior to November 3, 1998. The shares of
Common Stock underlying these Warrants are included in the Registration
Statement of which this Prospectus is a part.

In connection with the completion of the Company's $3,464,000 private
placement offering completed in March 1996, the Company issued Common Stock
Purchase Warrants to purchase 216,500 shares of Common Stock. These Warrants
are exercisable at $12.00 per share on or prior to March 15, 1999. In
addition, Warrants to purchase 450,000 Shares of Common Stock were issued to
the Company's investment banker for this transaction which are exercisable at
$8.00 per share on or prior to March 15, 1998. The shares of Common Stock
underlying these Warrants are included in the Registration Statement of which
this Prospectus is a part.

In connection with private placement transactions undertaken by the
Company during fiscal year 1993, the Company issued 44,196 Class F Warrants.
Each Class F Warrant entitles the holder to purchase one share of Common Stock
at an exercise price of $105.00 per share until November 1, 1998. The Class F
Warrants are redeemable on not less than 30 days written notice, provided the
average of the closing bid prices of the Common Stock as reported by the NASDAQ
Stock Market or on the over-the-counter market (or equivalent sales prices if
the Common Stock is listed on a national exchange or the NASDAQ National Market
System) equals or exceeded the average price of $140.00 for the 30 consecutive
trading days ending within 15-days of the notice of redemption.

The Company's outstanding warrants provide for adjustment of the
exercise price and for a change in the number of shares issuable upon exercise
to protect holders against dilution in the event of a stock dividend, stock
split, combination or reclassification of the Common Stock. The Warrants may
be exercised upon surrender of the Warrant Certificate on or prior to the
expiration date (or earlier redemption date, as applicable) of such Warrant at
the offices of the Company's transfer agent, with the form of "Election to
Purchase" completed and executed as indicated, accompanied by payment of the
full exercise price (by certified or bank check, payable to the order of the
Company), for the number of shares with respect to which the Warrant is being
exercised.

48
<PAGE> 54

TRANSFER AGENT

The Transfer Agent for the shares of Common Stock is Chase Mellon
Shareholder Services, LLC, Four Station Square - Third Floor, Pittsburgh, PA
15219.

CERTAIN MARKET INFORMATION

As of June 12, 1996, 6,922,830 shares of the Company's Common Stock
were outstanding of which 6,803,000 shares were "restricted securities," as
such term is defined under the Securities Act of 1933, exclusive of the Common
Stock to be sold pursuant to the Registration Statement of which this
Prospectus is a part.

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

LEGAL MATTERS

Legal matters in connection with the securities being offered hereby
will be passed upon for the Company by Atlas, Pearlman, Trop & Borkson, P.A.,
200 East Las Olas Boulevard, Suite 1900, Fort Lauderdale, Florida 33301.

EXPERTS

The consolidated financial statements of Viragen (Europe) Ltd. at June
30, 1995 and for the eleven weeks ended June 30, 1995 appearing in this
Prospectus and Registration Statement have been audited by Ernst & Young LLP,
independent certified public accountants, as set forth in their report thereon
appearing elsewhere herein and in the Registration Statement, and are included
in reliance upon such report given upon the authority of such firm as experts
in accounting and auditing.

49
<PAGE> 55

ADDITIONAL INFORMATION

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

50
<PAGE> 56

FORM SB-2--ITEM 22

VIRAGEN (EUROPE), LTD. AND SUBSIDIARY

LIST OF FINANCIAL STATEMENTS

The following consolidated financial statements of Viragen (Europe) Ltd. and
subsidiary are included:

<TABLE>
<S> <C>
Report of Independent Certified Public Accountants F-2

Consolidated balance sheets -- March 31, 1996
(unaudited) and June 30, 1995. F-3

Consolidated statements of operations -- Nine months
ended March 31, 1996 and 1995 (unaudited) and eleven
weeks ended June 30, 1995. F-4

Consolidated statements of stockholders' equity --
Nine months ended March 31, 1996 (unaudited) and eleven
weeks ended June 30, 1995. F-5

Consolidated statements of cash flows -- Nine months
ended March 31, 1996 and 1995 (unaudited) and eleven
weeks ended June 30, 1995. F-6

Notes to consolidated financial statements -- March 31,
1996 (unaudited) and June 30, 1995. F-7
</TABLE>

F-1

<PAGE> 57

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

Shareholders and Board of Directors
Viragen (Europe) Ltd.

We have audited the accompanying consolidated balance sheet of Viragen (Europe)
Ltd. and subsidiary as of June 30, 1995, and the related consolidated
statements of operations, stockholders' equity, and cash flows for the eleven
weeks ended June 30, 1995. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audit.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Viragen (Europe) Ltd. and subsidiary at June 30, 1995, and the consolidated
results of their operations and their cash flows for the eleven weeks ended
June 30, 1995, in conformity with generally accepted accounting principles.

ERNST & YOUNG LLP

Miami, Florida
September 5, 1995

F-2

<PAGE> 58

VIRAGEN (EUROPE) LTD. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
March 31, June 30,
1996 1995
--------- --------
(Unaudited)
ASSETS
CURRENT ASSETS

<S> <C> <C>
Cash $5,293,166 $50,226
Advances to parent 627,487 -
---------- -------
TOTAL CURRENT ASSETS 5,920,653 50,226

OTHER ASSETS
Deferred Expenses 6,551 7,707
---------- -------
$5,927,204 $57,933
========== =======

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 40,895 $ 7,307
Advances from parent - 48,386
---------- -------
TOTAL CURRENT LIABILITIES 40,895 55,693

STOCKHOLDERS' EQUITY

Common stock, par value $.01 per share;
20,000,000 shares authorized;
359,830 shares issued and outstanding 3,598 -

Common stock, par value $1.61 per share;
100 shares authorized, issued and
Outstanding - 161

Convertible preferred stock series B,
par value $.01 per share; 2,500,000
shares authorized; 2,000,000 shares
issued and outstanding 20,000 -

Additional paid-in capital 927,055 1,453
Common stock subscribed 5,156,416 -
Retained earnings (deficit) (204,560) 626
Foreign currency translation (16,200) -
---------- -------
TOTAL STOCKHOLDERS' EQUITY 5,886,309 2,240
---------- -------
$5,927,204 $57,933
========== =======
</TABLE>

See notes to consolidated financial statements

F-3

<PAGE> 59

VIRAGEN (EUROPE) LTD. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE> Eleven
Nine Months Ended Weeks Ended
March 31, June 30,
1996 1995 1995
---- ---- ----
(Unaudited)
<S> <S> <S> <C>
REVENUES
Interest income $ 27,105 $ - $ 626
---------- ------- -----
27,105 - 626
OPERATING EXPENSES
General and administrative
expenses 232,291 - -
---------- - -
NET (LOSS) INCOME $ (205,186) - $ 626
========== ======= =====
Net (Loss) Income per common
share $ (0.07) $ - $6.26
========== ======= =====
Weighted average common
shares outstanding 2,768,886 - 100
========== ======= =====
</TABLE>

See notes to consolidated financial statements.

F-4

<PAGE> 60

VIRAGEN (EUROPE) LTD. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION> Convertible Foreign
Common Common Preferred Additional Common Retained Currency
Stock, Stock, Stock Paid-in Stock Earnings Trans-
Par $.01 Par $1.61 Series B Capital Subscribed (Deficit) lation
-------- ---------- --------- --------------- ------------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Incorporation of
VSL in April 1995
(100 shares) $ $ 161 $ $ 1,453 $ $ $

Net income 626
-------- ----- ------- -------- ---------- --------- -------
Balance at
June 30, 1995 161 1,453 626

Reverse acquisition
of VEL (formerly
Sector) 1,198 (161) 20,000 178,002
Private Placement
(December 1995),
net of issuance
costs 2,400 747,600
Private Placements,
(March 1996),
net of issuance
costs 5,156,416

Net loss (205,186)
Foreign currency
translation
adjustment (16,200)
-------- ----- ------- -------- ---------- --------- --------
Balance at
March 31, 1996
(Unaudited) $ 3,598 $ $20,000 $927,055 $5,156,416 $(204,560) $(16,200)
======== ===== ======= ======== ========== ========= ========
</TABLE>

See notes to consolidated financial statements.

F-5

<PAGE> 61

VIRAGEN (EUROPE) LTD. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION> Eleven
Nine Months Ended Weeks Ended
March 31, June 30,
1996 1995 1995
---- ---- -----------
(Unaudited)

<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net (Loss) Income $ (205,186) $- $ 626
Adjustments to reconcile net (loss)
income to net cash (used in)
provided by operating activities:
Amortization of deferred expenses 1,156 - -
Increase (decrease) relating to
operating activities from:
Deferred expenses - - (7,707)
Accounts payable and accrued expenses 33,588 - 7,307
---------- ---- -------
Net cash (used in) provided by
operating activities (170,442) - 226

CASH FLOW FROM FINANCING ACTIVITIES:
Proceeds from private placements,
net of related expenses 5,156,416 - -
Cash acquired in reverse 916,239 - -
acquisition
Advances (to) from parent (675,873) - 50,000
Contributions from officers 400 - -
---------- - -------
Net cash provided by financing
activities 5,397,182 - 50,000

Effect of exchange rate fluctuations
on cash balances 16,200 - -
---------- ---- -------
Net increase in cash 5,242,940 - 50,226

Cash and cash equivalents at beginning
of period 50,226 - -
---------- ---- -------

Cash and cash equivalents at end
of period $5,293,166 $- $50,226
========== ==== =======
SUPPLEMENTAL DISCLOSURE ON NON-CASH
FINANCING ACTIVITIES:
In conjunction with the reverse
acquisition the following occurred:

Liabilities assumed $ 50,167

</TABLE>

See notes to consolidated financial statements.

F-6

<PAGE> 62

VIRAGEN (EUROPE) LTD. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 1996 (unaudited) and June 30, 1995

NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization and Consolidation: Viragen (Europe) Ltd. ("VEL") and its
subsidiary are engaged in the research, development and manufacture of certain
immunological products for commercial application. The consolidated financial
statements include the accounts of Viragen (Europe) Ltd. and its wholly-owned
subsidiary, Viragen (Scotland) Ltd. ("VSL"), collectively known as the Company.
All material intercompany accounts and transactions have been eliminated in
consolidation. Viragen (Europe) Ltd. is a majority-owned subsidiary of
Viragen, Inc. See Note C for further discussion relating to basis of
presentation.

Name Change and Reverse Stock Split: Effective May 2, 1996, the Company's name
was changed from Sector Associates, Ltd. to Viragen (Europe) Ltd. The common
stock was reverse split one share for fourteen (1:14) and the par value was
changed from $.10 per share to $.01 per share. The number of authorized common
shares was reduced from 50 million shares to 20 million shares.

The effect of the reverse split has been reflected in the consolidated
financial statements and accompanying notes for all periods presented.

Estimates: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements
and accompanying notes. Actual results could differ from those estimates.

Income Taxes: Deferred income taxes at the end of each period are determined
by applying enacted tax rates applicable to future periods in which the taxes
are expected to be paid or recovered to differences between financial
accounting and tax basis of assets and liabilities.

Income (Loss) Per Share: Income (loss) per share have been computed based on
the weighted average number of shares outstanding during each period. The
weighted average number of shares outstanding includes the assumed conversion
of the convertible preferred shares as of the issuance date, as they were issued
with the intention of granting Viragen

F-7

<PAGE> 63

VIRAGEN (EUROPE) LTD. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 1996 (unaudited) and June 30, 1995

NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- Continued

control of VEL. Common shares subscribed are assumed outstanding as of the
completion of the March 1996 private placements for purposes of the weighted
average shares outstanding calculation. The effect of warrants and stock
options (common stock equivalents) are antidilutive.

Deferred Expenses: Deferred expenses are amortized on the straight-line
method, over their estimated benefit period ranging to 60 months.

Foreign Currency Translation: The financial statements of the foreign
subsidiary have been translated into U.S. dollars in accordance with Statement
of Financial Accounting Standards No. 52. All balance sheet accounts have been
translated using the current exchange rates at the balance sheet date. Income
statement amounts have been translated using the average exchange rate for the
reporting period. The translation adjustments resulting from the change in
exchange rates from year to year have been reported separately as a component
of stockholders' equity. Foreign currency transaction gains and losses, which
are not material, are included in results of operations. These gains and
losses result from exchange rate changes between the time transactions are
recorded and settled and, for unsettled transactions, exchange rate changes
between the time transactions are recorded and the balance sheet date.

New Pronouncements: During the fiscal year commencing July 1, 1996, the
Company will adopt the provisions of FAS 121-Accounting for the Impairment of
Long-Lived Assets. FAS 121 requires impairment losses to be recorded on
long-lived assets when indicators of impairment are present and the
undiscounted cash flows estimated to be generated by those assets are less than
the assets' carrying amount. Based on current circumstances, the Company does
not believe the effect of adoption will be material. Also on July 1, 1996, the
Company plans to adopt the provisions of FAS 123-Accounting for Stock-Based
Compensation. The Company will continue to account for stock-based compensation
plans under the provisions of APB 25-Accounting for Stock Issued to Employees.
The Company will disclose the pro forma information required for stock-based
compensation plans in accordance with FAS 123.

F-8

<PAGE> 64

VIRAGEN (EUROPE) LTD. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 1996 (unaudited) and June 30, 1995

NOTE B - INTERIM ADJUSTMENTS

The financial information for the nine months ended March 31, 1996 includes, 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 the period.

Operating results for the nine months ended March 31, 1996 are not necessarily
indicative of the results that may be expected for the entire fiscal year
ending June 30, 1996.

While the Company believes that the disclosures presented are adequate to make
the information not misleading, it is suggested that these consolidated
financial statements be read in conjunction with the financial statements and
notes included in the Company's audited financial statements for the eleven
weeks ended June 30, 1995, included herein.

NOTE C - ACQUISITION - BASIS OF PRESENTATION

On September 20, 1995, Sector Associates, Ltd. ("Sector") (now named VEL)
entered into an agreement and Plan of Reorganization (the "Agreement") with
Viragen, Inc., a Delaware corporation. Under the terms of the Agreement,
Sector was to acquire a 100% interest in VSL, in consideration for a 94%
interest in Sector.

On November 7, 1995, the Agreement was amended to provide for an interim loan
of $500,000 by Sector to VSL, the filing of certain financial reports by Sector
prior to closing, a capital contribution of $300,000 into Sector within thirty
days, and the modification of a related investment banking agreement. The
$500,000 loan was funded November 9, 1995, bearing interest at 4% per annum,
secured by a 3.77% equity interest in VSL, and was guaranteed by Viragen, Inc.
Upon the closing of the Agreement on December 8, 1995, the principal amount of
the note was deemed contributed capital to Sector.

F-9

<PAGE> 65

VIRAGEN (EUROPE) LTD. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 1996 (unaudited) and June 30, 1995

NOTE C - ACQUISITION - BASIS OF PRESENTATION -- Continued

On December 8, 1995, Sector finalized the Agreement and acquired 100% of the
stock of VSL in exchange for 2,000,000 voting shares of Series B Convertible
Preferred Stock, convertible into 5,600,000 shares of common stock or
approximately 94% of the then issued and outstanding shares, as well as 94% of
the voting privileges, of Sector. As the Parent Company of VSL gained voting
control of Sector in this transaction, VSL became the acquiring entity and
accounting survivor. Accordingly, the acquisition 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, VEL (formerly Sector). The historical
financial statements for all periods presented up to December 8, 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, VEL 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.

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 approximately 0.71 share of Common
Stock, resulting in the issuance of 240,000 shares of Common Stock, and 2.50
Common Stock Purchase Warrants having an exercise price of $6.00 per share,
exercisable through November 3, 1998. At March 31, 1996, there were 840,000
Common Stock Purchase Warrants Outstanding resulting from this offering.

F-10

<PAGE> 66

VIRAGEN (EUROPE) LTD. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 1996 (unaudited) and June 30, 1995

NOTE D -- COMMON STOCK -- Continued

In March 1996, the Company completed two additional Private Placement
Offerings, issuing 768,000 shares of Common Stock and 216,500 Common Stock
Purchase Warrants having an exercise price of $12.00 per share, exercisable
through March 15, 1999. These two Offerings yielded net cash proceeds of
approximately $5,156,000 after related expenses of $547,400, of which $229,900
is payable in 195,000 shares of Common Stock and 450,000 Common Stock Purchase
Warrants having an exercise price of $8.00 per share, exercisable through
March 15, 1998.

Shares of the Company's common stock reserved at March 31, 1996 for possible
future issuance are as follows:

<TABLE>
<CAPTION>
Exercise March 31,
Price 1996
-------- ---------
<S> <C> <C>
Convertible Preferred Stock - Series B,
$.01 par value per share, 2,000,000
shares issued and outstanding 5,600,000
December 1995 Private Placement Warrants $ 6.00 840,000
March 1996 Private Placement Warrants 8.00 450,000
March 1996 Private Placement Warrants 12.00 216,500
Class B Warrant (exercisable through
June 30, 1996) 133.00 10,120
Class F Warrant (exercisable through
November 1, 1998) 105.00 44,196
---------
7,160,816
=========
</TABLE>

Note E - TRANSACTIONS WITH RELATED PARTIES

VSL was organized during April 1995 by Viragen, Inc. ("Viragen") to cause or to
undertake clinical trials in the EU and for sales of Viragen's natural alpha
interferon and related products in the EU and other countries outside the
United States. Accordingly, no financial data is available for Viragen
(Europe) Ltd. and subsidiary prior to April 1995.

F-11

<PAGE> 67

VIRAGEN (EUROPE) LTD. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 1996 (unaudited) and June 30, 1995

Note E - TRANSACTIONS WITH RELATED PARTIES -- Continued

Through a License Agreement (the "Agreement") granted by Viragen, Inc., VSL's
ultimate 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. 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
component in the manufacture of the Product. VSL was a newly formed
corporation which commenced operations concurrent with the execution of its
agreement with SNBTS.

Pursuant to the terms of the Agreement, VSL is to prepay $2 million of
royalties to Viragen, within six months of the Effective Date (July 12, 1995).
Commencing one year from the Effective Date, VSL is to pay to Viragen
royalties, as follows: the greater of $2 million annually or 10% of gross
revenues until the sum of $18 million has been paid; 8% of gross revenues until
the sum of $25 million has been paid; and 5% of gross revenues thereafter.

Viragen has deferred the Effective Date of the Agreement until the date when
Viragen transfers the processes and technology, as defined by the Agreement, to
VSL. This transfer is expected to coincide with the completion of the Scottish
manufacturing plant, which is scheduled for early calendar year 1997.

F-12

<PAGE> 68

VIRAGEN (EUROPE) LTD. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 1996 (unaudited) and June 30, 1995

Note F - INCOME TAXES

In March 1996, as further discussed in Note D, VEL's private placements
resulted in the percentage of ownership held by its Parent Company, Viragen,
Inc., to decrease to less than 80%. Accordingly, subsequent to that date, the
Company will be obligated to file separate federal and state income tax
returns, and, accordingly, reflect its income tax liability on a separate
return basis.

VSL files separate income tax returns in the United Kingdom.

As of June 30, 1995, VEL (formerly Sector) had net operating loss carryforwards
("NOLs") for U.S. income tax purposes of approximately $1.2 million that expire
at various dates through 2010 and capital loss carryforwards of approximately
$1.7 million that expire at various dates through 2000. In December 1995,
Sector (now VEL) had a change in ownership, as defined by Internal Revenue Code
Section 382, which causes these net operating and capital loss carryforwards to
be limited to approximately $48,000 per year. The deferred tax asset relating
to the NOLs is offset, for financial reporting purposes, by a valuation
allowance of the same amount.

For financial reporting purposes, loss before income taxes include the
following components:

<TABLE>

Nine Months Ended
March 31, 1996
-----------------
<S> <C>
Pre-tax loss:
U.S. $147,378
Foreign 57,808
--------
$205,186
========
</TABLE>

Note G - PRO FORMA RESULTS OF OPERATIONS (Unaudited)

The pro forma financial data included herein reflects the results of
operations, as if the reverse acquisition of VEL had been completed at the
beginning of the current fiscal period and at the inception of VSL,
respectively. The pro forma financial data was calculated by pro rating the
results of operations of VEL (formerly Sector) for the applicable periods.

F-13

<PAGE> 69

VIRAGEN (EUROPE) LTD. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 1996 (unaudited) and June 30, 1995

Note G - PRO FORMA RESULTS OF OPERATION (Unaudited) -- Continued

<TABLE>
<CAPTION>
Nine Months Eleven Weeks
Ended Ended
March 31, 1996 June 30, 1995
-------------- -------------
<S> <C> <C>

Interest Income $ 33,514 $ 2,263
------------- ------------
Total Income 33,514 2,263
Operating Expenses 321,852 139,781
------------- ------------
Net Loss $ (288,338) $ (137,517)
============= ============
Loss per common share $ (0.10) $(0.77)
============= ============
Weighted Average Shares Outstanding 2,768,886 177,541
============= ============
</TABLE>

Note H - CONTINGENCY

An action is pending against VEL (formerly Sector) alleging that Sector
mishandled payment of amounts due to a secured creditor. Sector has denied the
claim and has filed a counterclaim. Further, a shareholder of Sector has
agreed to indemnify VEL relating to this matter. Although the ultimate
liability, if any, cannot be determined at this time, management intends to
vigorously defend its position.

F-14

<PAGE> 70

No person has been authorized to give any information or to
make any representations other than those contained in this
Prospectus in connection with this offering, and any
information or representations not contained herein must not
be relied upon as having been authorized by the Company or any
other person. This Prospectus does not constitute an offer to
sell or a solicitation of an offer to buy any securities other
than the securities to which it relates, or any offer to or
solicitation of any person in any jurisdiction in which such
offer or solicitation would be unlawful. Neither the delivery
of this Prospectus nor any offer or sale made hereunder shall,
under any circumstances, create an implication that
information herein is correct at any time subsequent to the
date hereof.

___________

<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
----
<S> <C>
Prospectus Summary......... 4
High Risk Factors.......... 8
Price Range of Common
Stock.................... 15
Dividend Policy............ 15
Capitalization............. 16
Use of Proceeds............ 17
Selected Consolidated
Financial Data........... 17
Management's Discussion
and Analysis or Plan
of Operations............ 18
Business................... 21
Management................. 31
Certain Transactions....... 35
Clinical Advisory
Committee................ 38
Principal Stockholders..... 42
Description of Securities.. 47
Certain Market
Information.............. 49
Legal Matters.............. 49
Experts.................... 49
Additional Information..... 50
</TABLE>

VIRAGEN (EUROPE) LTD.

2,961,454 SHARES

COMMON STOCK

___________________________________

PROSPECTUS
__________________________________

____________, 1996

<PAGE> 71

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 24. INDEMNIFICATION OF DIRECTORS AND EXECUTIVE OFFICERS

Section 145 of the General Corporation Law of Delaware, under which
jurisdiction the Company is incorporated, empowers a corporation to indemnify
any person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative by reason of the fact that he or she
is or was a director, officer, employee or agent of the corporation or is or
was serving at the request of the corporation as a director, officer, employee
or agent of another corporation or enterprise. A corporation may indemnify
against expenses (including attorneys' fees) and, other than in respect of an
action by or in the right of the corporation, against judgments, fines and
amounts paid in settlement actually and reasonably incurred in connection with
such action, suit or proceeding if the person indemnified acted in good faith
and in a manner he or she reasonably believed to be in or not opposed to the
best interests of the corporation, and with respect to any criminal action or
proceeding, had no reasonable cause to believe his or her conduct was unlawful.
In the case of an action by or in the right of the corporation, no
indemnification of expenses may be made in respect to any claim, issue or
matter as to which such person shall have been adjudged to be liable to the
corporation unless and only to the extent that the Court of Chancery or the
court in which such action was brought shall determine that, despite the
adjudication of liability, such person is fairly and reasonably entitled to
indemnity for such expenses which the court shall deem proper. Section 145 of
the General Corporation Law of Delaware further provides that to the extent a
director, officer, employee or agent of the corporation has been successful in
the defense of any action, suit or proceeding referred to above or in the
defense of any claim, issue or matter therein, he or she shall be indemnified
against expenses (including attorneys' fees) actually and reasonably incurred
by him or her in connection therewith.

ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The following table sets forth the estimated expenses to be incurred
in connection with the issuance and resale of the securities offered hereby.
The Company is responsible for the payment of all expenses in connection with
the Offering.

II - 1
<PAGE> 72

<TABLE>
<S> <C>
Registration fee under
the Securities Act of 1933.................. $25,529.77
Blue Sky filing fees and expenses............ 2,000.00*
Printing and engraving expenses.............. 10,000.00*
Legal fees and expenses...................... 15,000.00*
Accounting fees and expenses................. 15,000.00*
Miscellaneous................................ 2,470.23*
-----------
Total................................... $70,000.00*
===========
</TABLE>

- -------------------
*Estimated

ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.

All figures give effect to a one for fourteen (1:14) reverse stock split,
effective May 2, 1996.

In March 1996, the Company issued 335,000 shares of its Common Stock,
effective March 15, 1996 (the "Reverse Split") in consideration of $2,010,000
to accredited investors in a private placement undertaken pursuant to
Regulation D of the Securities Act of 1933, as amended (the "Act"). Each of
the investors executed subscription agreements verifying their personal
financial resources, their qualifications as accredited investors and knowledge
of investments. In addition, each of the investors was provided with
information and had access to relevant additional information concerning the
Company. Accordingly, the issuance of the aforementioned securities was exempt
from the registration requirements of the Act pursuant to the exemptions set
forth in Section 4(6) of the Act and Rule 505 under Regulation D and Section
4(2) of the Act.

In March 1996, the Company also issued 433,000 shares of its Common
Stock and Warrants to purchase up to 216,500 shares of its Common Stock (giving
effect to the Company's Reverse Stock Split) at $12.00 per share to accredited
investors in consideration of $3,464,000 in a private placement undertaken
pursuant to Regulation D of the Securities Act of 1933, as amended (the "Act").
The Common Stock directly issued or underlying the Warrants are being
registered pursuant to this Registration Statement. Each of the investors
executed subscription agreements verifying their personal financial resources,
their qualifications as accredited investors and knowledge of investments. In
addition, each of the investors was provided with information and had access to
relevant additional information concerning the Company. Accordingly, the
issuance of the aforementioned securities was exempt from the registration
requirements of the Act pursuant to the exemptions set forth in Section 4(6) of
the Act and Rule 505 under Regulation D and Section 4(2) of the Act.

In December, 1995, the Company issued 100,000 shares of Common Stock
upon exercise of options each to (i) Gerald Smith, the

II - 2
<PAGE> 73

Company's President, Chairman and (ii) Robert Zeiger, the Company's Chief
Executive Officer and Chief Operating Officer and Director, (iii) Dennis
Healey, the Company's Executive Vice President, Chief Financial Officer,
Treasurer, Secretary and a Director, and (iv) to an employee of Viragen upon
the exercise of certain stock options granted by each of them by VSL. Pursuant
to the consummation of the transactions contemplated by the Agreement and Plan
of Reorganization by and among the Company, Viragen, the majority stockholder
of the Company and VSL, the stock options originally granted by VSL were
exchanged for Company options. The options were exercised at $.001 per share
of Common Stock of the Company. Inasmuch as each of the employees had a
preexisting relationship with the Company, has access to relevant information
pertaining to the Company and were accredited investors, the transaction was
exempt under Section 4(2) of the Act.

On September 20, 1995, the Company entered into an Agreement and Plan
of Reorganization and pursuant to which the Company agreed to acquire 100% of
the issued and outstanding stock of VSL, a Scottish limited private limited
company, in exchange for the distribution to Viragen, of newly-issued shares of
convertible preferred stock that upon conversion represented 5,600,000 shares
of Common Stock of the Company or approximately 94% of the outstanding capital
stock interest of the Company. On November 7, 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. The transaction was exempt pursuant to Section 4(2) of
the Act.

In December 1995, the Company issued 240,000 shares of its Common
Stock and warrants to purchase up to 840,000 shares of its Common Stock and
Warrants exercisable at $6.00 per Unit in consideration of $750,000 to three
accredited investors in a private placement of such securities undertaken
pursuant to Regulation S (as to two of the investors who are British Virgin
Islands corporations) and Rule 505 (as to the third investor) of the Regulation
D and Section 4(6) of the Act. The proceeds from the private offering were
used for payment of the loan and cash consideration in connection with the
Agreement and Plan of Reorganization and Amendment described above. Each of
the investors executed subscription agreements verifying their personal
financial resources, their qualifications as accredited investors and knowledge
of investments. In addition, each of the investors was provided with
information and had access to relevant additional information concerning the
Company. Furthermore, two of the investors also verified that they were
British Virgin Islands corporations. Accordingly, the issuance of the
aforementioned securities was exempt from the registration

II - 3
<PAGE> 74

requirements of the Act pursuant to the exemptions set forth in Regulation S of
the Act, Section 4(6) of the Act, Rule 505 under Regulation D and Section 4(2)
of the Act. In addition, 195,000 shares and 450,000 warrants were issued to
FAC Enterprises Inc. ("FAC"). FAC and certain of his affiliates have provided
investment banking and consulting services to the Company. FAC also received
200,000 shares for services performed in connection with the December 8, 1995
closing of the Agreement and Plan of Reorganization by and among the Company,
and Viragen. The issuance of the securities to FAC were exempt pursuant to
Section 4(2) of the Act.

In November 1993, the Company entered into a number of transactions
with its former principal stockholder and Chairman of the Board, Mr. George
Levin, inter alia, Mr. Levin exchanged approximately $769,000 of indebtedness
owed to him by the Company in return for 15,694 shares of Common Stock of the
Company. In light of Mr. Levin's preexisting relationship, the issuance of the
shares of Common Stock of the Company as part of a broader range of
transactions was an exempt transaction pursuant to Section 4(2) of the Act.

ITEM 27. EXHIBITS.

EXHIBIT NO. DESCRIPTION OF EXHIBITS

(2) Plan of acquisition, reorganization, arrangement, liquidation
or succession(2)

(2)(i) Agreement and Plan of Reorganization dated September 20, 1995
(incorporated by reference to the Company's report on Form 8-K
dated December 8, 1995 ("December 1995 8-K))

(2)(ii) Amendment to the Agreement and Plan of Reorganization dated
November 8, 1995 (incorporated by reference to the Company's
December 1995 8-K)

(3)(i) Certificate of Incorporation dated November 4, 1985
(incorporated by reference to the Company's registration
statement, filed No. 33-1952-NY (the "Registration
Statement"))

(3)(ii) Amended Certificate of Incorporation dated April 14, 1987
(incorporated by reference to the Company's Annual Report on
Form 10-KSB for the fiscal year ended June 30, 1994 ("1994
10-KSB))

(3)(iii) Amended Certificate of Incorporation dated October 9, 1987
(incorporated by reference to the Company's 1994 10-KSB)

II - 4
<PAGE> 75

EXHIBIT NO. DESCRIPTION OF EXHIBITS

(3)(iv) Amended Certificate of Incorporation dated November 18, 1987
(incorporated by reference to the Company's 1994 10-KSB))

(3)(v) Amended Certificate of Incorporation dated December 9, 1987
(incorporated by reference to the Company's 1994 10-KSB)

(3)(vi) Amended Certificate of Incorporation dated December 18, 1987
(incorporated by reference to the Company's Post Effective
Amendment No. 3 to the Company's Registration Statement filed
on or about May 2, 1989 ("Post-Effective Amendment No. 3")

(3)(vii) Amended Certificate of Incorporation dated January 17, 1989
(incorporated by reference to the Company's Post-Effective
Amendment No. 3)

(3)(viii) Amended Certificate of Incorporation dated June 9, 1989
(incorporated by reference to the Company's Annual Report on
Form 10-KSB for the fiscal year ended June 30, 1993 ("1993
10-KSB")

(3)(ix) Amended Certificate of Incorporation dated August 2, 1993
(incorporated by reference to the 1993 10-KSB)

(3)(x) Amended Certificate of Incorporation dated December 13, 1993
(incorporated by reference to the 1993 10-KSB)

(3)(xi) Bylaws of the Company (incorporated by reference to
Post-Effective Amendment No. 3)

(4) Instruments defining the rights of security holders, including
indentures(2)

(4)(i) Form of Common Stock Certificate(incorporated by reference to
the Company's Form 8-A dated June 14, 1989 ("Form 8A"))

(4)(ii) Form of Class B Redeemable Common Stock Purchase Warrant
(incorporated by reference to Form 8-A)

(4)(iii) Form of Class F Redeemable Common Stock Purchase Warrant
(incorporated by reference to the Company's Annual Report on
Form 10-KSB dated June 30, 1994 (the "1994 10-KSB"))

II - 5
<PAGE> 76

EXHIBIT NO. DESCRIPTION OF EXHIBITS

(4)(iv) Warrant Agreement for Class B Redeemable Common Stock Purchase
Warrants (incorporated by reference to Form 8-A dated June 14,
1989)

(4)(v) Warrant Agreement for Class F Redeemable Common Stock Purchase
Warrants (incorporated by reference on the 1994 10-KSB)

(5) Opinion of Atlas, Pearlman, Trop & Borkson, P.A. as to the
validity of the securities being registered(2)

(10) Material contracts(2)

(10)(i) Letter Agreement between FAC Enterprises, Inc. and Viragen,
Inc. dated November 7, 1995(incorporated by reference to the
Company's December 1995 8-K)

(21) Subsidiaries of the Registrant(1)

(23)(i) Consent of Ernst & Young LLP(1)

(23(ii) Consent of Atlas, Pearlman, Trop & Borkson, P.A. (included as
part of Exhibit (5))

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

(1) Filed herewith.
(2) To be filed by Amendment.

ITEM 28. UNDERTAKINGS

(a) The undersigned Registrant hereby undertakes:

(1) To file, during any period in which it offers or
sells securities being made, a post-effective amendment to this Registration
Statement:

(i) To include any Prospectus required by Section
10(a)(3) of the Securities Act of 1933;

(ii) To reflect in the prospectus any facts or
events which, individually or together, represent a fundamental change in the
information set forth in the Registration Statement;

(iii) To include any additional or changed material
information with respect to the plan of distribution.

(2) For determining any liability under the Securities
Act of 1933, as amended, treat each post-effective amendment as a new
registration statement relating to the securities offered, and the

II - 6
<PAGE> 77

offering of the securities at that time to be the initial bona fide offering.

(3) To file a post-effective amendment to remove any of
the securities that remain unsold at the end of the offering.

(b) Insofar as indemnification for liabilities arising under the
Securities Act of 1933, as amended (the "Act"), may be permitted to directors,
officers and controlling persons of the Registrant pursuant to the foregoing
provisions, or otherwise, the Registrant has been advised that, in the opinion
of the Securities and Exchange Commission, such indemnification is against
public policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer
or controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.

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<PAGE> 78

SIGNATURES

In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements of filing on Form SB-2 and authorized this Amendment to
its Registration Statement to be signed on its behalf by the undersigned in the
City of Hialeah, State of Florida, on July 1, 1996.

VIRAGEN (EUROPE) LTD.

By: /s/ Gerald Smith
-----------------------------
Gerald Smith, Chairman of
Board and President

In accordance with the requirements of the Securities Act of 1933,
this Amendment to the Registration Statement was signed by the following
persons in the capacities and on the dates stated.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
Chairman of the
Board of Directors,
/s/Gerald Smith President and Principal
- ------------------------- Executive Officer July 1, 1996
Gerald Smith

Executive Vice
President, Trea-
surer and Principal
Financial Officer
/s/Dennis W. Healey and Accounting July 1, 1996
- ------------------------- Officer
Dennis W. Healey

Chief Executive
/s/Robert Zeiger Officer and Director July 1, 1996
- -------------------------
Rboert Zeiger
</TABLE>

<PAGE> 1

EXHIBIT 21

Subsidiaries of the Registrant

Viragen (Scotland) Ltd., a wholly-owned subsidiary of the Company.

<PAGE> 1
EXHIBIT 23

CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated September 5, 1995, in the Registration Statement (Form
SB-2) and related Prospectus of Viragen (Europe) Ltd. for the registration of
2,961,454 shares of its common stock.

Ernst & Young LLP

Miami, Florida
June 25, 1996