As Filed With the Securities and Exchange Commission on May 30, 2003
Registration No. 333-________
================================================================================
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
VIRAGEN, INC.
(Exact name of Registrant as Specified in Its Charter)
DELAWARE
(State or other jurisdiction of incorporation or organization)
59-2101668
(I.R.S. Employer Identification No.)
865 S.W. 78TH AVENUE, SUITE 100
PLANTATION, FLORIDA 33324
(954) 233-8746
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
Copies to:
DENNIS W. HEALEY JAMES M. SCHNEIDER, ESQ.
EXECUTIVE VICE PRESIDENT SCHNEIDER WEINBERGER LLP
VIRAGEN, INC. 2499 GLADES ROAD, SUITE 108
865 S.W. 78TH AVENUE, SUITE 100 BOCA RATON, FL 33431
PLANTATION, FLORIDA 33324 TELEPHONE: (561) 362-9595
(954) 233-8746 FACSIMILE: (561) 362-9612
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Approximate date of commencement of proposed sale to the public: From time to
time as described in the Prospectus.
If the only securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box. [ ]
If any of the securities being registered on this Form to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, please check the following box. [X]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please 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 statement number of the earlier effective 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. [ ]
CALCULATION OF REGISTRATION FEE
PROPOSED
MAXIMUM PROPOSED
TITLE OF EACH CLASS OF SECURITIES TO BE AMOUNT TO BE OFFERING PRICE MAXIMUM AGGREGATE AMOUNT OF
REGISTERED REGISTERED PER UNIT (1) OFFERING PRICE (1) REGISTRATION FEE
------------------------------------------------- ---------------- ----------------- --------------------- -------------------
Common stock, $.01 par value per share,
issuable upon conversion of
convertible debentures (2) 18,790,660 $0.36 $ 6,764,638 $ 547.26
Common stock, $.01 par value per share,
issuable upon exercise of common
stock purchase warrants (3) 31,451,848 $0.36 $11,322,665 $ 916.00
---------- ----- ----------- ---------
50,242,508 $18,087,303 $1,463.26
========== =========== =========
----------------
(1) Estimated solely for the purpose of computing the amount of the
registration fee in accordance with Rule 457 under the Securities Act of
1933.
(2) Shares of our common stock issuable upon the conversion of convertible
debentures. Fee based on the last sale price of our common stock, $.01
par value per share, as reported by the American Stock Exchange on May
23, 2003, which was greater than the $0.20 price at which the convertible
debentures are convertible into shares of our common stock.
(3) Shares of our common stock issuable upon the exercise of common stock
purchase warrants. Fee based on the last sale price of our common stock,
$.01 par value per share, as reported by the American Stock Exchange on
May 23, 2003, which was greater than the $0.0625 exercise price of the
common stock purchase warrants.
Pursuant to Rule 416 under the Securities Act of 1933, there are also being
registered such additional number of shares as may be issuable as a result of
stock splits, dividends, reclassifications and similar adjustment provisions of
the debentures and warrants.
Viragen, Inc. will amend this registration statement on the date or dates as may
be necessary to delay its effective date until Viragen 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 this registration statement shall become effective on the
date as the Securities and Exchange Commission, acting pursuant to said Section
8(a), may determine.
Subject to Completion
Dated May __, 2003
Selling Security Holder Offering Prospectus
VIRAGEN, INC.
50,242,508 shares of common stock
This prospectus covers the resale of an aggregate of 50,242,508 shares
of our common stock, consisting of 18,790,660 shares issuable upon conversion of
convertible debentures and 31,451,848 shares issuable upon exercise of common
stock purchase warrants. We will not receive any proceeds from the sale of
shares by the selling security holders.
Our common stock is listed on the American Stock Exchange under the
symbol "VRA". On May 23, 2003, the last reported sale price for our common stock
was $0.36 per share.
THIS INVESTMENT INVOLVES A HIGH DEGREE OF RISK. YOU SHOULD PURCHASE
SHARES ONLY IF YOU CAN AFFORD A COMPLETE LOSS. SEE "RISK FACTORS" BEGINNING AT
PAGE 7.
----------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this prospectus is __________, 2003.
TABLE OF CONTENTS
PAGE
----
About Viragen .................................................... 3
Where You Can Find More Information .............................. 4
Forward-Looking Statements ....................................... 6
Risk Factors ..................................................... 7
Use of Proceeds .................................................. 15
Selling Security Holders ......................................... 15
Plan of Distribution ............................................. 18
Description of Securities ........................................ 19
Legal Matters .................................................... 20
Experts .......................................................... 20
You should rely only on the information provided or incorporated by
reference in this prospectus. We have not authorized anyone to provide you with
additional or different information. This document may only be used where it is
legal to sell these securities. You should not assume that any information in
this prospectus is accurate as of any date other than the date of this
prospectus.
2
ABOUT VIRAGEN
Because this is a summary, it does not contain all the information
about us that may be important to you. You should read the more detailed
information and the financial statements and related notes which are
incorporated by reference in this prospectus.
Viragen, Inc. and its subsidiaries are engaged in the research,
development, manufacture and sale of a natural human alpha interferon product
designed to treat a broad range of viral and malignant diseases. We are also
researching and developing recombinant protein-based drugs designed to treat a
broad range of cancers. Viragen's strategy also includes the development of
avian transgenics technology for the large-scale, cost-effective contract
manufacturing of protein-based drugs.
Our majority-owned subsidiary, Viragen International, Inc., whose
shares are traded on the over-the-counter Bulletin Board under the symbol
"VGNI," is a biopharmaceutical company engaged in researching, developing,
manufacturing and selling a natural human alpha interferon product designed to
treat a broad range of viral and malignant diseases. Viragen International, Inc.
produces a natural human alpha interferon under the name Multiferon(TM), from
human white blood cells, also known as leukocytes. Natural human alpha
interferon stimulates and modulates the human immune system. In addition,
natural human alpha interferon inhibits the growth of various viruses including
those associated with diseases like hepatitis, cancer, multiple sclerosis, and
HIV/AIDS.
Our avian transgenic project is designed to enable us to produce
protein-based drugs, including monoclonal antibodies, inside the eggs of
specially developed chickens. Monoclonal antibodies are laboratory-produced,
highly specialized therapeutic proteins that can locate and bind to cancer cells
wherever they are in the body. Many monoclonal antibodies are used in cancer
detection or therapy. Our goal is to develop a technology which will enable us
to meet the large-scale production requirements for our own therapeutic
protein-based products. We also believe this technology has potential to offer
to others in the biopharmaceutical industry an alternate faster method of
production of their protein-based products with higher capacity and at a lower
cost. Specifically, using transgenic chickens in production may provide
advantages over current traditional methods including relative ease of scale-up,
time to develop commercial scale production levels and reduced capital outlay
when compared to the most common production methods, which utilize capital
intensive bioreactors.
Viragen believes that no single approach or method is likely to treat
all cancers effectively. We have approached the treatment of targeted cancers
from several directions, which we believe will increase our likelihood of
clinical success. In collaboration with the Memorial Sloan-Kettering Cancer
Center, we have initiated research on human monoclonal antibodies targeting
ganglioside GD3 for the treatment of melanoma and possibly certain other
cancers. In collaboration with the UK's Cancer Research Campaign, we are
developing DNA vaccines and monoclonal antibodies to block the protective effect
of the protein CD55 on the surface of tumor cells. In collaboration with the
University of Miami's Sylvester Comprehensive Cancer Center, we are researching
and developing a specific anti-cancer technology designed to develop a novel
form of an immune enhancing drug that has shown promise by inhibiting tumor
growth in rats for a broad range of cancers. The drug is a novel 11 amino acid
peptide called IEP 11, which was derived from a tumor transmembrane
glycoprotein. We believe IEP 11 possesses anti-cancer vaccine properties, both
prophylactically and therapeutically.
Our executive offices are located at 865 SW 78th Avenue, Suite 100,
Plantation, Florida 33324. Our telephone number is (954) 233-8746; our facsimile
number is (954) 233-1414. Unless otherwise indicated, references in this
prospectus to "Viragen," "we," "us" and "our" are to Viragen, Inc., and our
wholly-owned and majority-owned subsidiaries.
3
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission a
registration statement on Form S-3 under the Securities Act for the common stock
offered by this prospectus. This prospectus, which is a part of the registration
statement, does not contain all of the information in the registration statement
and the exhibits filed with it, portions of which have been omitted as permitted
by Securities and Exchange Commission rules and regulations. For further
information concerning us and the securities offered by this prospectus, we
refer to the registration statement and the exhibits filed with it. Statements
contained in this prospectus as to the content of any contract or other document
referred to are not necessarily complete. Where a contract or other document is
an exhibit to the registration statement, you should review the provisions of
the exhibit to which reference is made. You may obtain these exhibits from the
Securities and Exchange Commission, as discussed below.
We are required to file annual, quarterly, and current reports, proxy
statements and other information with the Securities and Exchange Commission.
You may read and copy these filings at the Securities and Exchange Commission's
Public Reference Room at 450 Fifth Street, N.W. Washington, D.C. 20549, and at
the Securities and Exchange Commission's regional offices located in New York,
NY and Chicago, IL. You may request copies of these documents by writing to the
Securities and Exchange Commission and paying the required fee for copying.
Please call the Securities and Exchange Commission at 1-800-SEC-0330 for more
information about the operation of their public reference rooms. Copies of our
filings are also available at the Securities and Exchange Commission website at
http://www.sec.gov.
The Securities and Exchange Commission allows us to "incorporate by
reference" information that we file with them, which means that we can disclose
important information to you by referring you to those documents. The
information incorporated by reference is an important part of this prospectus,
and information that we file later with the Securities and Exchange Commission
will automatically update and supercede this information. We incorporate by
reference the documents listed below and any future filings we make with the
Securities and Exchange Commission under Section 13(a), 14 or 15(d) of the
Securities Exchange Act of 1934:
o Our Definitive Proxy Statement filed with the SEC on May 28, 2003;
o Our Quarterly Report on Form 10-Q for the quarter ended March 31,
2003 filed with the SEC on May 14, 2003;
o Our amended Quarterly Report on Form 10-Q/A for the quarter ended
December 31, 2002 filed with the SEC on March 20, 2003;
o Our Quarterly Report on Form 10-Q for the quarter ended December 31,
2002 filed with the SEC on February 14, 2003;
o Our Current Report on Form 8-K dated January 30, 2003 filed with the
SEC on January 30, 2003;
4
o Our Definitive Proxy Statement filed with the SEC on December 20,
2002;
o Our Current Report on Form 8-K dated November 19, 2002 filed with
the SEC on November 19, 2002;
o Our Quarterly Report on Form 10-Q for the quarter ended September
30, 2002 filed with the SEC on November 14, 2002; and
o Our Annual Report on Form 10-K for the year ended June 30, 2002
filed with the SEC on September 30, 2002.
We will deliver without charge a copy of our Annual Report on Form 10-K
for the fiscal year ended June 30, 2002 and our Quarterly Report on Form 10-Q
that has been filed with the SEC for any quarter ended after June 30, 2002 to
each person receiving a copy of this prospectus. If you need an additional copy
of these documents, or if you would like to receive a copy of the other items
referenced above, you may request copies, at no cost, by writing or telephoning
us at the following address:
Dennis W. Healey
Chief Financial Officer
Viragen, Inc.
865 S.W. 78th Avenue, Suite 100
Plantation, Florida 33324
Telephone Number: (954) 233-8746
Copies of our SEC filings and other information about us are also
available on our website at www.viragen.com. The information on our website is
neither incorporated into, nor a part of, this prospectus.
5
FORWARD-LOOKING STATEMENTS
This prospectus, and other documents that we have incorporated by
reference or included by attachment, contain forward-looking statements.
Forward-looking statements express our expectations or predictions of future
events or results. They are not guarantees and are subject to many risks and
uncertainties. There are a number of factors - many beyond our control - that
could cause actual events or results to be significantly different from those
described in the forward-looking statement. Any or all of our forward-looking
statements in this report or in any other public statements we make may turn out
to be wrong.
Forward-looking statements might include one or more of the following:
o anticipated debt or equity fundings;
o projections of future revenue;
o anticipated clinical trial commencement dates, completion timelines
or results;
o descriptions of plans or objectives of management for future
operations, products or services;
o forecasts of future economic performance; and
o descriptions or assumptions underlying or relating to any of the
above items.
Forward-looking statements can be identified by the fact that they do
not relate strictly to historical or current facts. They use words such as
"anticipate," "estimate," "expect," "project," "intend," "plan," "believe" or
words of similar meaning. They may also use words such as "will," "would,"
"should," "could" or "may". Factors that may cause our actual results to differ
materially from those described in forward-looking statements include the risks
discussed elsewhere in this prospectus under the caption "Risk Factors".
6
RISK FACTORS
AN INVESTMENT IN OUR COMMON STOCK IS HIGHLY SPECULATIVE. YOU SHOULD BE
AWARE YOU COULD LOSE THE ENTIRE AMOUNT OF YOUR INVESTMENT. PRIOR TO MAKING AN
INVESTMENT DECISION, YOU SHOULD CAREFULLY READ THIS ENTIRE PROSPECTUS AND
CONSIDER THE FOLLOWING RISK FACTORS. THE RISKS AND UNCERTAINTIES DESCRIBED BELOW
ARE NOT THE ONLY ONES WE FACE. THERE MAY BE ADDITIONAL RISKS AND UNCERTAINTIES
THAT ARE NOT KNOWN TO US OR THAT WE DO NOT CONSIDER TO BE MATERIAL AT THIS TIME.
IF THE EVENTS DESCRIBED IN THESE RISKS OCCUR, OUR BUSINESS, FINANCIAL CONDITION
AND RESULTS OF OPERATIONS COULD BE ADVERSELY AFFECTED. THIS PROSPECTUS CONTAINS
FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES. OUR ACTUAL
RESULTS MAY DIFFER SIGNIFICANTLY FROM THE RESULTS DISCUSSED IN THE
FORWARD-LOOKING STATEMENTS. THIS SECTION DISCUSSES THE BUSINESS RISK FACTORS
THAT MIGHT CAUSE THOSE DIFFERENCES.
RISKS RELATED TO OUR FINANCIAL CONDITION
WE HAVE A HISTORY OF LOSSES DUE TO LACK OF SALES AND REGULATORY APPROVALS. IF WE
DO NOT RECEIVE NECESSARY REGULATORY APPROVALS AND DEVELOP PROFITABLE OPERATIONS,
WE WILL NEED TO TERMINATE OUR OPERATIONS. AS A RESULT, INVESTORS MAY LOSE THEIR
ENTIRE INVESTMENT.
Since the organization of Viragen, we have incurred operating losses.
Losses have totaled:
o $11,179,261 for the nine month period ended March 31, 2003;
o $11,088,832 for the fiscal year ended June 30, 2002;
o $11,007,809 for the fiscal year ended June 30, 2001; and
o $12,310,895 for the fiscal year ended June 30, 2000.
At March 31, 2003, we had a total deficit since organization of
$96,120,461, and our working capital deficit totaled $1,930,103.
For the fiscal year ended June 30, 2002, the report of our independent
auditors includes an explanatory paragraph indicating substantial doubt as to
our ability to continue as a going concern, due to our financial condition. Our
financial condition has not improved subsequent to our fiscal year end. If we
are unable to raise sufficient equity or debt financing, it would be necessary
for us to significantly curtail or suspend a portion or all of our operations.
Further, sufficient funding may not be available to finance current or future
scientific collaborations, planned marketing efforts or planned plant facility
expansions or modifications.
We presently produce a natural human alpha interferon product under the
name MULTIFERON(TM). The product is approved in Sweden for the treatment of
chronic myeloid leukemia, hairy cell leukemia and for the treatment of any and
all diseases for which recombinant interferon therapy failed or the patient was
unable to tolerate the regimen. The product is also approved for sale in the
Czech Republic, Hong Kong, Indonesia, Mexico, Myanmar, Thailand, and as purified
bulk in Egypt. However, as the United States Food and Drug Administration and
other European Union regulatory authorities have not approved our natural
interferon product, we have limited sales revenues. We have not sought the
approval of our natural human interferon product from the United State Food and
Drug Administration or its European Union counterparts, except Sweden.
7
We will not be able to significantly reduce our losses or operate
profitably until we obtain the necessary approvals to manufacture and sell
natural interferon or other products on a widely accepted basis. We expect sales
of natural interferon to be our primary source of income for the foreseeable
future. Investors must understand that our natural interferon product may never
receive certain approvals sought from regulatory authorities. In addition, even
if approval is received, we may not be able to achieve sufficient profit from
the sale of natural interferon. If we do not obtain the required approvals, or
we do not profit from the sale of natural interferon or other products, we will
likely cease operations. In that case, investors in Viragen will likely lose
their entire investment.
OUR BUSINESS IS CAPITAL INTENSIVE, AND BECAUSE WE DO NOT GENERATE SUFFICIENT
OPERATING REVENUES, WE WILL REQUIRE ADDITIONAL FINANCING THAT MAY NOT BE
AVAILABLE TO US.
We believe that our cash and cash equivalents and working capital
deficit are not sufficient to meet our operating requirements through the end of
fiscal 2003. Our operating losses and working capital requirements continue to
adversely affect cash flow. In the event of our inability to raise capital, or a
lack of expanded revenue from the sale of our natural interferon product, we
will likely be unable to meet our operating requirements through the end of
fiscal 2003. In this event, we would be required to significantly curtail or
suspend our operations. As a result of these financial conditions, the report of
our independent certified public accountants on our June 30, 2002 consolidated
financial statements includes an explanatory paragraph indicating that these
conditions raise substantial doubt about our ability to continue as a going
concern.
IF WE ARE UNABLE TO OBTAIN ADDITIONAL FUNDS FROM OTHER FINANCINGS WE MAY HAVE TO
SIGNIFICANTLY CURTAIL THE SCOPE OF OUR OPERATIONS AND ALTER OUR BUSINESS MODEL.
We must achieve profitability for our business model to succeed. Prior
to accomplishing this goal, we will need to raise additional funds, from equity
or debt sources. Our cash requirements are substantial. While we raised
approximately $3.11 million, net of related fees, in a recent convertible
debenture transaction, and we expect draw downs to be available to us under a
recently executed equity line agreement, the proceeds of these financings may
still not be sufficient to meet our cash needs in the future. In addition,
business and economic conditions may make it unfeasible or undesirable to
initiate draw down under equity line agreement, and only one draw down may occur
at a time. If additional financing is not available when required or is not
available on acceptable terms, we may be unable to continue our operations at
current levels. In addition, any failure to raise additional funds in the future
may result in our inability to successfully promote our brand name, complete
existing and/or undertake new research and development projects, take advantage
of business opportunities or respond to competitive pressures, any of which
could have a material adverse effect on our financial condition and results of
operations.
RISKS RELATED TO THIS OFFERING AND THE MARKET FOR OUR SHARES
THE ISSUANCE OF OUR SHARES UPON CONVERSION OF THE CONVERTIBLE DEBENTURES MAY
CAUSE SIGNIFICANT DILUTION TO OUR STOCKHOLDERS AND, TOGETHER WITH GUIDANCE WE
ISSUE TO ANALYSTS AND THE FINANCIAL COMMUNITY, MAY HAVE AN ADVERSE IMPACT ON THE
MARKET PRICE OF OUR COMMON STOCK.
Resales of shares by the purchaser under our equity line agreement will
increase the number of our publicly traded shares, which could depress the
market price of our common stock. Moreover, as all the shares we sell under the
equity line will be available for immediate resale, the mere prospect of these
resales could depress the market price for our common stock. The shares of our
common stock issuable under the equity line facility will be sold at 85% of the
daily volume weighted average price of our common stock on the date of purchase.
8
If we require the purchaser to purchase our common stock at a time when our
stock price is low, our existing common stockholders will experience substantial
dilution. The issuance of shares under the equity line therefore dilute the
equity interest of existing stockholders and could have an adverse effect on the
market price of our common stock.
Even though the conversion price of the convertible debentures was
substantially above the market price of our common stock on the date they were
sold, the issuance of our shares upon conversion of the convertible debentures
and their resale by debenture holders will also increase our publicly traded
shares. These resales could also depress the market price of our common stock.
We will not control whether or when debenture holders elects to convert their
shares, but it can be assumed that they will do so at a time when the conversion
price is less than the market price for our shares.
The perceived risk of dilution may cause our stockholders to sell their
shares, which would contribute to a downward movement in the stock price of our
common stock. Moreover, the perceived risk of dilution and the resulting
downward pressure on our stock price could encourage investors to engage in
short sales of our common stock. By increasing the number of shares offered for
sale, material amounts of short selling could further contribute to progressive
price declines in our common stock.
WE DO NOT CURRENTLY MEET MINIMUM BID PRICE REQUIREMENTS OF THE AMERICAN STOCK
EXCHANGE, AND IF WE ARE DELISTED FROM THE AMERICAN STOCK EXCHANGE, THE TRADING
MARKET FOR OUR COMMON STOCK COULD BE ELIMINATED.
Our common stock is quoted on the American Stock Exchange. In order to
continue to be included in the American Stock Exchange, a company must meet the
American Stock Exchange's maintenance criteria. The maintenance criteria most
applicable to us requires a minimum bid price of $1.00 per share, $4,000,000 in
net tangible assets and $5,000,000 market value of the public float. The public
float excludes shares held directly or indirectly by any of our officers,
directors and holders of 10% or more of our outstanding common stock. Failure to
meet these maintenance criteria may result in the delisting of our common stock
from the American Stock Exchange. As of March 31, 2003, we had approximately
$10.1 million of net tangible assets. On May 23, 2003, the market value of our
public float was approximately $77 million. However, our current bid price does
not satisfy the American Stock Exchange's minimum bid price requirement. Due to
current economic and market conditions the American Stock Exchange has not
elected to delist many of the companies who currently fail to meet the minimum
bid price requirement, however, we cannot assure you that the American Stock
Exchange will not delist our common stock in the future or that we will continue
to meet the other listing criteria. The issuance by us of shares of common stock
to debenture holders or under the equity line agreement, or the subsequent
resale by the holders of those shares, in either case at a discount to the
market price, may further reduce the trading price of our common stock below the
American Stock Exchange minimum bid price requirement. If our common stock is
delisted and in order to have our common stock relisted on the American Stock
Exchange, we would be required to meet the criteria for initial listing, which
are more stringent than the maintenance criteria. Accordingly, we cannot assure
you that if we were delisted we would be able to have our common stock relisted
on the American Stock Exchange or any other trading market.
If our common stock were delisted from the American Stock Exchange and
we were unsuccessful in securing a listing on another national exchange or
Nasdaq, the market price for our shares could decline. Further, if our common
stock is removed from listing on the American Stock Exchange, it may become more
difficult for us to raise funds through the sale of our common stock or
securities convertible into our common stock.
9
IF OUR STOCKHOLDERS DO NOT APPROVE AN INCREASE IN THE NUMBER OF SHARES WE ARE
AUTHORIZED TO ISSUE, WE WILL BE IN BREACH OF OUR CONVERTIBLE DEBENTURES, WE WILL
NOT HAVE A SUFFICIENT NUMBER OF SHARES TO ENABLE DEBENTURE HOLDERS AND WARRANT
HOLDERS TO FULLY CONVERT THEIR DEBENTURES AND WARRANTS, AND WE WILL BE UNABLE TO
DRAW DOWN ON OUR EQUITY LINE AGREEMENT.
We have called a meeting of our stockholders to approve an amendment to
our certificate of incorporation that would increase the number of shares we are
authorized to issue to 700 million. Approval of the amendment requires the
affirmative vote by holders of a majority of our outstanding shares. If
stockholders do not approve the amendment, we will not have a sufficient number
of authorized but unissued shares to enable debenture holders to fully convert
their debentures and warrant holders to fully exercise their warrants. If we do
not have sufficient authorized but unissued shares to enable debenture holders
to convert their debentures after June 1, 2003, we will be in default under the
debentures and the debenture holders may accelerate payment of all amounts due
under the debentures and/or may convert the debentures into a monetary payment
based on the market value of our stock on the date of conversion. If we do not
have sufficient authorized but unissued shares to enable warrant holders to
receive shares upon exercise of their warrants, we could be liable for monetary
damages to warrant holders. Moreover, if stockholders do not approve the
amendment, we will also be unable to drawdown our equity line agreement, which
could require us to curtail operations. We are unable to predict whether
stockholders will approve the amendment to our certificate of incorporation.
RISKS RELATED TO OUR BUSINESS
COMPETITIVE CONDITIONS IN THE PHARMACEUTICAL INDUSTRY MAY FORCE US TO TERMINATE
OPERATIONS.
Competition for investment capital and market share in the
immunological and pharmaceutical products industry is very strong. Our
competitors, which include major pharmaceutical companies, have more experience
in research, development and clinical testing of pharmaceutical and biomedical
products. We have not yet developed an immunological product that can be widely
marketed. Our competitors also have greater financial, marketing and human
resources. Some of our competitors, including Hoffmann-La Roche, Inc.,
Shering-Plough Corporation, Biogen, Inc., Chiron Corp., and Berlex Laboratories,
have received approvals for their synthetic interferons. They have been
marketing their products since 1986 and have received wide acceptance from the
medical community and the patient population for their products. This will make
it more difficult for us to introduce and penetrate the market with our product,
if and when we receive the necessary regulatory approval. We expect competition
to increase in the future.
In addition, technological advances made by our competitors may make
synthetic products more effective, less costly and with less harmful side
effects. We may not be able to keep pace with technological advances by others,
either because we do not have sufficient resources or because we cannot achieve
greater improvements in our technology. If we are unable to compete with our
larger, more experienced competitors, we will likely terminate operations.
Competition for funding in the pharmaceutical industry is also intense.
We have a limited source of income at this time, and we will require additional
funding to conduct clinical trials so we can receive regulatory approvals. We
must obtain additional funding from outside sources to conduct these trials. If
we are unable to locate funding or obtain funding on reasonable terms, we will
likely terminate operations. In that case, investors in Viragen will likely lose
their entire investment.
10
GOVERNMENT REGULATION MAY AFFECT VIRAGEN'S ABILITY TO DEVELOP AND DISTRIBUTE
NATURAL INTERFERON.
All pharmaceutical manufacturers are subject to state, federal and
foreign rules and regulations, including those of the United States Food and
Drug Administration, Asian markets and the European Union regulatory
authorities. These rules and regulations are constantly changing. These changes
could extend the period of clinical trials, involve costly compliance measures
and may restrict our ability to produce and distribute our natural interferon
product based on the results of testing. It is possible that we may never
receive these regulatory approvals for any specific illness or range of
illnesses that we are attempting to treat with our natural interferon product.
IF PATIENTS HAVE PROBLEMS RECEIVING THIRD PARTY REIMBURSEMENTS FOR NATURAL
INTERFERON, IT WILL BE MORE DIFFICULT TO MARKET OUR PRODUCT. IN ADDITION, OUR
MARKETING COSTS WOULD INCREASE.
Our ability to successfully market our products depends in part on the
availability of reimbursements from government health administration
authorities, private health coverage insurers and other organizations. The
pricing of products similar to ours, or the amount of reimbursement available to
patients, may affect our ability to market our product at a profit. Third party
reimbursement limitations could restrict the patient population that will use
our product. If we have difficulty in securing third party payors to reimburse
for our product, we could be required to increase our marketing efforts, which,
in turn, will involve greater expense to us.
OUR PROPRIETARY TECHNOLOGY AND ANY FUTURE PATENTS THAT WE RECEIVE MAY NOT
PROVIDE SUFFICIENT PROTECTION TO US.
We intend to rely, in part, on technology developed by our scientists
for the efficient and safe production of natural interferon, our avian
transgenics technologies and our oncology technologies. If we are not successful
in obtaining patents or demonstrating that our production processes are
proprietary under trade secret law, we will have limited protection against
those who might copy our technology. We have not received any communications or
had any conversations with the owners of related patents that may potentially
make claims or who have threatened to make a claim that our patents infringe
their patents. However, we may be damaged if we are accused of misappropriating
a competitor's proprietary technology, even if these claims are untrue. We
cannot assure you that any of our patent applications will be approved. Even if
granted, we cannot assure you that these patents or any future patent
applications or our other proprietary rights will provide sufficient protection
to us.
WE MAY NOT BE ABLE TO PRODUCE TARGETED DRUGS IN EGG WHITES OF TRANSGENIC
CHICKENS IN COMMERCIALLY VIABLE QUANTITIES.
Our avian transgenics project is designed to enable Viragen to produce
protein-based drugs, including monoclonal antibodies, inside the egg whites of
transgenic developed chickens. Even if we are successful in producing the
targeted proteins in egg whites, we are unable to predict whether this
technology will yield commercially viable quantities.
TECHNOLOGY TRANSFERS TO THIRD PARTIES MAY NOT RESULT IN REVENUE TO US.
One of our proposed marketing strategies is to license our
manufacturing technology to third parties. They, in turn, will use our
technology to produce and market our natural interferon outside the United
States of America. We cannot guarantee that these third parties will be able to
successfully market the product or that we will receive revenue from their
efforts.
11
WE MAY BE EXPOSED TO PRODUCT LIABILITY CLAIMS, AND OUR PRODUCT LIABILITY
INSURANCE MAY NOT BE SUFFICIENT TO COVER ALL CLAIMS OR CONTINUE TO BE AVAILABLE
TO US.
Persons who claim to be injured from use of our natural interferon, or
other products or processes, may file claims for personal injuries or other
damages against us. Directives in the European Union provide for strict
liability and permit compensation claims to be made within a ten year period
from when the product is placed on the market, and three years from the event
giving rise to the claim, thereby creating a 13 year period within which
compensation claims could be asserted. In order to protect ourselves against
these claims, we maintain product liability insurance in the amount of
$7,000,000. We cannot be sure that our insurance coverage will be adequate to
insulate us from liabilities that may result from the use of our products. Also,
this type of insurance may not be available, or we may not be able to afford
this form of insurance in the future.
OUR RELIANCE ON FOREIGN THIRD PARTY MANUFACTURERS MAY DISRUPT OPERATIONS.
Foreign manufacturing could expose us to risks involved with
fluctuations in exchange rates of foreign currencies. In addition, reliance on
international vendors exposes us to all the risks of dealing with a foreign
manufacturing source. These risks include:
o unexpected changes in regulatory requirements;
o tariffs and other trade barriers, including import and export
restrictions;
o political or economic instability;
o compliance with foreign laws;
o transportation delays and interruptions;
o difficulties in protecting intellectual property rights in foreign
countries; and
o currency exchange risks.
Foreign manufacturing arrangements may also limit our control, and
could disrupt our operations, which, in turn, could negatively impact upon your
investment in us.
WE DO NOT EXPECT TO PAY DIVIDENDS IN THE FORESEEABLE FUTURE.
We have never paid cash dividends on our common stock. We do not expect
to pay cash dividends on our common stock any time in the foreseeable future.
The future payment of dividends directly depends upon our future earnings,
capital requirements, financial requirements and other factors that our board of
directors will consider. For the foreseeable future, we will use earnings from
operations, if any, to finance our growth, and we will not pay dividends to our
common stockholders. You should not rely on an investment in our common stock if
you require dividend income. The only return on your investment in our common
stock, if any, would most likely come from any appreciation of our common stock.
POSSIBLE SALES OF SECURITIES BY CURRENT STOCKHOLDERS COULD HAVE A DEPRESSIVE
EFFECT ON MARKET VALUE OF OUR STOCK.
As of May 30, 2003 the date of this prospectus, there are 213,761,636
shares of our common stock outstanding. Sales of our common stock by current
stockholders or pursuant to this registration statement may have a depressive
effect on the market price for our common stock.
WE ARE ENGAGED IN THE BIOTECHNOLOGY INDUSTRY; AS A RESULT, THE MARKET PRICE FOR
OUR COMMON STOCK MAY BE SUBJECT TO EXTREME VOLATILITY.
The market for securities of biotechnology companies, including
companies such as ours, has historically been more volatile than the market for
stocks in general. As a result, the price of our common stock may be subject to
wide fluctuations in response to factors, some of which are beyond our control,
including, without limitation:
12
o quarter-to-quarter variations in our operating results;
o our announcement of material events;
o price fluctuations in sympathy to others engaged in our industry;
and
o the effects of media coverage of our business.
Because of the limited trading market for our common stock, and because
of the possible price volatility, you may not be able to sell your shares of
common stock when you desire to do so. The inability to sell your shares in a
rapidly declining market may substantially increase your risk of loss because of
such illiquidity and because the price for our common stock may suffer greater
declines because of its price volatility.
Viragen's common stock traded on the over-the-counter Bulletin Board
from June 29, 1999 through April 16, 2000, under the symbol "VRGN." Our common
stock began trading on the American Stock Exchange on April 17, 2000, under the
symbol "VRA." Our common stock has traded between a high of $1.69 and a low of
$0.05 since January 1, 2001.
WE DEPEND ON THE CONTINUED SERVICES OF OUR EXECUTIVE OFFICERS AND ON OUR ABILITY
TO ATTRACT AND MAINTAIN OTHER QUALIFIED EMPLOYEES.
Robert C. Salisbury succeeded Gerald Smith as our President and Chief
Executive Officer on January 30, 2003. The loss of Mr. Salisbury's services
could have a material adverse affect on our business, financial condition and
results of operations. While we do not currently have an employment agreement
with Mr. Salisbury, we do not anticipate that Mr. Salisbury will retire or leave
the service of the Company in the near future. Other than Mr. Salisbury, we do
not believe that the loss of the services of any of our employees, including
those located in our Swedish and Scottish operations, would materially adversely
affect our business, financial condition, or results of operations. Though
competition for qualified scientific and managerial personnel is at times
intense in the markets in which we operate, we have in the past had a high level
of success in attracting and retaining such personnel, and, while we can give
you now assurance, we anticipate continued success in such regard in the future.
WE COULD USE PREFERRED STOCK TO RESIST TAKEOVERS, AND THE ISSUANCE OF PREFERRED
STOCK MAY CAUSE ADDITIONAL DILUTION.
Our Certificate of Incorporation authorizes the issuance of up to
1,000,000 shares of preferred stock, of which 2,650 shares of series A preferred
stock are issued and outstanding on the date of this prospectus. Our Certificate
of Incorporation gives our board of directors the authority to issue preferred
stock without approval of our stockholders. We may issue additional shares of
preferred stock to raise money to finance our operations. We may authorize the
issuance of the preferred stock in one or more series. In addition, we may set
the terms of preferred stock, including:
o dividend and liquidation preferences;
o voting rights;
o conversion privileges;
o redemption terms; and
o other privileges and rights of the shares of each authorized series.
13
The issuance of large blocks of preferred stock could possibly have a
dilutive effect to our existing stockholders. It can also negatively impact our
existing stockholders' liquidation preferences. In addition, while we include
preferred stock in our capitalization to improve our financial flexibility, we
could possibly issue our preferred stock to friendly third parties to preserve
control by present management. This could occur if we become subject to a
hostile takeover that could ultimately benefit Viragen and Viragen's
stockholders.
14
USE OF PROCEEDS
We will not receive any proceeds from the sale of shares by the selling
security holders.
To the extent that the warrants underlying certain of the shares
covered by this prospectus are exercised on other than a cashless basis, we
could receive gross proceeds of up to approximately $1.97 million. We plan to
use any proceeds we receive upon the exercise of warrants for general corporate
purposes.
Pending use of the net proceeds for any of these purposes, we may
invest the net proceeds in short-term investment grade instruments,
interest-bearing bank accounts, certificates of deposit, money market
securities, U.S. government securities or mortgage-backed securities guaranteed
by federal agencies.
SELLING SECURITY HOLDERS
TRANSACTION OVERVIEW
On April 16, 2003, Viragen entered into a securities purchase agreement
with Palisades Equity Fund LP, Crescent International Ltd. and Alpha Capital AG.
The agreement was amended on May 8, 2003 and May 16, 2003, to among other
things, include Bristol Investment Fund, Ltd. as an investor. The securities
purchase agreement, as amended, provided for the purchase and sale of our
convertible debentures in the aggregate amount of approximately $3.76 million.
Under the terms of the agreement, as amended, Viragen received approximately
$3.11 million, net of original issue discounts of $406,087, and a 6.5% finder's
fee and legal expenses. Our obligations under the convertible debentures have
been guaranteed by our subsidiaries and a security agreement covering all assets
not otherwise encumbered.
These convertible debentures mature on July 1, 2005, and are payable,
without interest, in 24 equal payments of principal commencing August 1, 2003.
In lieu of interest, the debentures provided for an original issue discount
equal to $270,000. The debentures are convertible immediately by Investor, in
whole or in part, into shares of Viragen common stock at a conversion price
equal to $0.20. In the event the five closing bid prices of Viragen's common
stock immediately prior to the monthly redemption date exceeds $0.25, Viragen is
permitted to repay the debentures through the issuance of its common stock
valued at $0.20 per share. Resale of the shares of our common stock issuable
upon conversion of these debentures, or pursuant to the payment provision, is
covered by this prospectus. Viragen has the right to redeem all, but not less
than all, debentures outstanding at 120% of the remaining principal of
debentures then outstanding.
The conversion price of the debentures is subject to adjustment in the
event of:
o stock splits, dividends and combinations;
o distributions on account of our common stock; and/or
o our issuance of additional common stock at less than the conversion
price of the debenture on the date of issuance or less than the fair
market value of our common stock on the date of issuance.
15
COMMON STOCK PURCHASE WARRANTS
In connection with the securities purchase agreement dated April 16,
2003, as amended, we issued common stock purchase warrants to Palisades Equity
Fund LP, Crescent International Ltd., Alpha Capital AG, Bristol Investment Fund,
Ltd. and HPC Capital Management, as placement agent, to purchase an aggregate of
31,451,848 shares of our common stock. Resale of the shares of our common stock
issuable upon exercise of these warrants is covered by this prospectus. The
warrants are exercisable:
o at a price of $0.0625 per share;
o during the three year period terminating April 16, 2003; and
o on a cashless basis, whereby the holder, rather than pay the
exercise price in cash, may surrender a number of warrants equal to
the exercise price of the warrants being exercised.
The number of shares issuable upon exercise of the warrants, and the
exercise price, is subject to adjustment in the event of:
o subdivisions, combinations, stock dividends, mergers and/or
reclassifications of our common stock;
o mergers;
o certain distributions on account of our common stock; and/or
o our issuance of additional common stock at less that the exercise
price of the warrants on the date of issuance or less than the fair
market value of our common stock on the date of issuance.
OWNERSHIP TABLE
The following table sets forth:
o the name of each selling security holder;
o the amount of common stock owned beneficially by each selling
security holder (which includes those shares underlying the
convertible debentures) notwithstanding the contractual limitation
on each selling security holder that they may not beneficially own
more than 4.9% of our common stock at any time;
o the number of shares that may be offered by each selling security
holder pursuant to this prospectus;
o the number of shares to be owned by each selling security holder
following sale of the shares covered by this prospectus; and
o the percentage of our common stock to be owned by each selling
security holder following sale of the shares covered by this
prospectus (based on 213,761,636 shares of common stock of Viragen
outstanding as of the date of this prospectus), as adjusted to give
effect to the issuance of shares upon the exercise of the named
selling security holder's warrants, but no other person's warrants.
Beneficial ownership is determined in accordance with the rules of the
SEC and generally includes voting or investment power with respect to
outstanding voting securities, as well as any voting securities which the person
has the right to acquire within 60 days, through the conversion or exercise of
any security or other right. The information as to the number of shares of our
common stock owned by each selling security holder is based upon our books and
records and the information provided by our transfer agent.
16
We may amend or supplement this prospectus, from time to time, to
update the disclosure set forth in the table. Because the selling security
holders identified in the table may sell some or all of the shares owned by them
which are included in this prospectus, and because there are currently no
agreements, arrangements or understandings with respect to the sale of any of
the shares, no estimate can be given as to the number of shares available for
resale hereby that will be held by the selling security holders upon termination
of this offering. We have, therefore, assumed for the purposes of the following
table, that the selling security holders will sell all of the shares owned
beneficially by them, which are covered by this prospectus, but will not sell
any other shares of our common stock that they presently own.
NUMBER OF SHARES NUMBER OF NUMBER OF SHARES PERCENT
BENEFICIALLY OWNED SHARES TO BE OWNED AFTER AFTER
NAME OF SELLING SECURITY HOLDER AND TO BE OWNED (6) OFFERED OFFERING OFFERING
------------------------------- ------------------- ------------- ------------------ --------
Palisades Equity Fund LP 17,873,986 (1) 17,873,986 0 *
Crescent International Limited 13,333,333 (2) 13,333,333 0 *
Alpha Capital AG 12,234,440 (3) 12,234,440 0 *
Bristol Investment Fund Limited 6,666,667 (4) 6,666,667 0 *
HPC Capital Management 134,082 (5) 134,082 0 *
---------------------
* less than 1%
(1) Includes 6,702,745 shares underlying convertible debentures and 11,171,241
shares underlying common stock purchase warrants.
(2) Includes 5,000,000 shares underlying convertible debentures and 8,333,333
shares underlying common stock purchase warrants.
(3) Includes 4,587,915 shares underlying convertible debentures and 7,646,525
shares underlying common stock purchase warrants.
(4) Includes 2,500,000 shares underlying convertible debentures and 4,166,667
shares underlying common stock purchase warrants.
(5) Includes 134,082 shares underlying common stock purchase warrants.
(6) Each investor's beneficial ownership is contractually limited to 4.9% of
our issued and outstanding stock.
Viragen agreed to pay for all costs and expenses in the issuance,
offer, sale and delivery of the shares of our common stock. These include all
expenses and fees of preparing, filing and printing the registration statement
and mailing of these items. Viragen will not pay selling commissions and
expenses for any sales by the selling security holders, but will indemnify the
selling security holders against civil liabilities including liabilities under
the Securities Act of 1933.
17
PLAN OF DISTRIBUTION
The selling stockholders and any of their pledgees, assignees and
successors-in-interest may, from time to time, sell any or all of their shares
of common stock on any stock exchange, market or trading facility on which the
shares are traded or in private transactions. These sales may be at fixed or
negotiated prices. The selling stockholders may use any one or more of the
following methods when selling shares:
o ordinary brokerage transactions and transactions in which the
broker-dealer solicits purchasers;
o block trades in which the broker-dealer will attempt to sell the
shares as agent but may position and resell a portion of the block
as principal to facilitate the transaction;
o purchases by a broker-dealer as principal and resale by the
broker-dealer for its account;
o an exchange distribution in accordance with the rules of the
applicable exchange;
o privately negotiated transactions;
o settlement of short sales;
o broker-dealers may agree with the selling stockholders to sell a
specified number of such shares at a stipulated price per share;
o a combination of any such methods of sale; and
o any other method permitted pursuant to applicable law.
The selling stockholders may also sell shares under Rule 144 under the
Securities Act of 1933, if available, rather than under this prospectus.
Broker-dealers engaged by the selling stockholders may arrange for other
broker-dealers to participate in sales. Broker-dealers may receive commissions
or discounts from the selling stockholders (or, if any broker-dealer acts as
agent for the purchaser of shares, from the purchaser) in amounts to be
negotiated. The selling stockholders do not expect these commissions and
discounts to exceed what is customary in the types of transactions involved.
The selling stockholders may, from time to time, pledge or grant a
security interest in some or all of the shares or common stock or warrants owned
by them and, if they default in the performance of their secured obligations,
the pledgees or secured parties may offer and sell the shares of common stock,
from time to time, under this prospectus, or under an amendment to this
prospectus under Rule 424 (b)(3) or other applicable provision of the Securities
Act of 1933 amending the list of selling stockholders to include the pledgee,
transferee or other successors-in-interest as selling stockholders under this
prospectus.
The selling stockholders also may transfer the shares of common stock
in other circumstances, in which case the transferees, pledgees or other
successors-in-interest will be the selling beneficial owners for purposes of
this prospectus.
The selling stockholders and any broker-dealers or agents that are
involved in selling the shares may be deemed to be "underwriters" within the
meaning of the Securities Act of 1933 in connection with such sales. In such
event, any commissions received by such broker-dealers or agents and any profit
on the resale of the shares purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act of 1933. The selling
stockholders have informed us that they do not have any agreement or
understanding, directly or indirectly, with any person to distribute the common
stock.
We are required to pay all fees and expenses incident to the
registration of the shares. We have agreed to indemnify the selling stockholders
against certain losses, claims, damages and liabilities, including liabilities
under the Securities Act of 1933.
18
DESCRIPTION OF SECURITIES
Viragen is currently authorized to issue up to 250,000,000 shares of
common stock, par value $.01 per share and 1,000,000 shares of preferred stock,
par value $1.00 per share. As of the date of this prospectus, there are
213,761,636 shares of common stock and 2,650 shares of preferred stock
outstanding.
COMMON STOCK
Subject to the dividend rights of preferred stockholders, common
stockholders share dividends on a proportionate basis, as may be declared by the
board of directors. Upon liquidation, dissolution or winding up of Viragen,
after payment to creditors and holders of our outstanding preferred stock,
Viragen's remaining assets, if any, will be divided proportionately on a per
share basis among the holders of our common stock.
Each share of our common stock has one vote. Holders of our common
stock do not have cumulative voting rights. This means that the holders of a
plurality of the shares voting for the election of directors can elect all of
the directors. In that event, the holders of the remaining shares will not be
able to elect any directors. Viragen's By-Laws provide that a majority of the
outstanding shares of our common stock are a quorum to transact business at a
stockholders' meeting. Our common stock has no preemptive, subscription or
conversion rights. Also, our common stock is not redeemable.
PREFERRED STOCK
Viragen is authorized to issue a total of 1,000,000 shares of preferred
stock, par value $1.00 per share. Viragen's board of directors may issue
preferred stock by resolutions, without any action of the stockholders. These
resolutions may authorize issuance of preferred stock in one or more series. In
addition, the board of directors may fix and determine all privileges and rights
of the authorized preferred stock series including:
o dividend and liquidation preferences,
o voting rights,
o conversion privileges, and
o redemption terms.
Viragen includes preferred stock in its capitalization to improve its
financial flexibility. However, Viragen could use preferred stock to preserve
control by present management, in the event of a potential hostile takeover of
Viragen. In addition, the issuance of large blocks of preferred stock could have
a dilutive effect to existing holders of Viragen's common stock.
SERIES A PREFERRED STOCK
Viragen established the series A preferred stock in November 1986. Each
share of series A preferred stock is immediately convertible into 4.26 shares of
our common stock. Dividends on the series A preferred stock are cumulative and
have priority to our common stock. These dividends are payable in either cash or
common stock, at Viragen's option.
The series A preferred stock has voting rights only if dividends are in
arrears for five annual dividends. Upon this occurrence, the voting is limited
19
to the election of two directors. Voting rights terminate upon payment of the
cumulative dividends. Viragen may redeem the series A preferred stock at any
time after expiration of ten consecutive business days during which the bid or
last sale price for our common stock is $6.00 per share or higher. There is no
mandatory redemption or sinking fund obligation for the series A preferred
stock.
Owners of the series A preferred stock are entitled to receive $10.00
per share, plus accrued and unpaid dividends, upon liquidation, dissolution or
winding up of Viragen. This must be satisfied before any distribution or payment
is made to holders of the common stock or other stock of Viragen junior to the
series A preferred stock.
TRANSFER AGENT
The transfer agent for the shares of our common stock is Mellon
Investor Services, Overpeck Center, 85 Challenger Road, Ridgefield Park, New
Jersey 07660-2108.
LEGAL MATTERS
Schneider Weinberger LLP will review the validity of the issuance of
the shares of common stock offered by this prospectus. Schneider Weinberger LLP
is located at 2499 Glades Road, Suite 108, Boca Raton, Florida 33431.
EXPERTS
Ernst & Young LLP, independent certified public accountants, have audited our
consolidated financial statements included in our Annual Report on Form 10-K for
the year ended June 30, 2002, as set forth in their report, and which contains
an explanatory paragraph describing conditions that raise substantial doubt
about the Company's ability to continue as a going concern as described in Note
A to the consolidated financial statements, which is incorporated by reference
in this prospectus and elsewhere in the registration statement. Our consolidated
financial statements are incorporated by reference in reliance on Ernst & Young
LLP's report, given on their authority as experts in accounting and auditing.
20
Viragen, Inc.
Prospectus
____, 2003
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Other expenses in connection with the registration of the common stock
hereunder are substantially as follows (all expenses other than the SEC
Registration Fee are estimates):
ITEM COMPANY EXPENSE
---- ---------------
SEC Registration Fee $1,463
Printing and engraving expenses 2,000
Legal fees and expenses 5,000
Accounting fees and expenses 5,000
Miscellaneous 1,171
--------
TOTAL $14,634
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the General Corporation Law of Delaware allows a
corporation to indemnify any person who was or is, or is threatened to be made a
party to any threatened, pending, or completed suit or proceeding. This applies
whether the matter is civil, criminal, administrative or investigative because
he or she is or was a director, officer, employee or agent of the corporation.
A corporation may indemnify against expenses, including attorney's
fees, and, except for an action by or in the name of the corporation, against
judgments, fines and amounts paid in settlement as part of this suit or
proceeding. This applies only if the person indemnified acted in good faith and
in a manner he or she reasonably believed to be in the best interest of the
corporation. In addition, with respect to any criminal action or proceeding, the
person had no reasonable cause to believe his or her conduct was unlawful.
In the case of an action by or in the name of the corporation, no
indemnification of expenses may be made for any claim, as to which the person
has been found to be liable to the corporation. The exception is if the court in
which this action was brought determines that the person is reasonably entitled
to indemnity for expenses.
Section 145 of the General Corporation Law of Delaware further provides
that if a director, officer, employee or agent of the corporation has been
successful in the defense of any suit, claim or proceeding described above, he
or she will be indemnified for expenses, including attorney's fees, actually and
reasonably incurred by him or her.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers or persons controlling
Viragen pursuant to the foregoing provisions, Viragen has been informed that in
the opinion of the Securities and Exchange Commission, indemnification is
against public policy as expressed in the Securities Act of 1933 and is,
therefore, unenforceable. In the event that a claim for indemnification against
these liabilities, other than the payment by Viragen in the successful defense
of any action, suit or proceeding, is asserted, Viragen 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
indemnification by it is against public policy. Viragen will be governed by the
final adjudication of this issue.
II-1
ITEM 16. EXHIBITS.
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------ -----------------------
5.1 Opinion and Consent of Schneider Weinberger LLP (includes Exhibit
23.2)*
10.71 Securities Purchase Agreement dated April 16, 2003 between Viragen,
Inc., Palisades Equity Fund L.P., Crescent International Ltd., and
Alpha Capital AG (incorporated by reference to Viragen, Inc.'s Form
10-Q filed with the Securities and Exchange Commission on May 14,
2003)
10.72 Form of Secured Convertible Debenture for Securities Purchase
Agreement dated April 16, 2003 (incorporated by reference to
Viragen, Inc.'s Form 10-Q filed with the Securities and Exchange
Commission on May 14, 2003)
10.73 Form of Stock Purchase Warrant for Securities Purchase Agreement
dated April 16, 2003 (incorporated by reference to Viragen, Inc.'s
Form 10-Q filed with the Securities and Exchange Commission on May
14, 2003)
10.74 Registration Rights Agreement dated April 16, 2003 between Viragen,
Inc., Palisades Equity Fund L.P., Crescent International Ltd., and
Alpha Capital AG (incorporated by reference to Viragen, Inc.'s Form
10-Q filed with the Securities and Exchange Commission on May 14,
2003)
10.75 Additional Funding Agreement dated May 8, 2003 between Viragen,
Inc., Palisades Equity Fund L.P., Crescent International Ltd., and
Alpha Capital AG (incorporated by reference to Viragen, Inc.'s Form
10-Q filed with the Securities and Exchange Commission on May 14,
2003)
10.76 Additional Funding Agreement dated May 13, 2003 between Viragen,
Inc. and Bristol Investment Fund, Ltd.*
23.1 Consent of Independent Certified Public Accountants*
23.2 Consent of Schneider Weinberger LLP (included as part of Exhibit
5.1)*
---------------
* Filed herewith
II-2
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are 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 arising
after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement.
Provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if the
registration statement is on Form S-3 or Form S-8, and the information required
to be included in a post-effective amendment by those paragraphs is contained in
periodic reports filed by the registrant pursuant to section 13 or section 15(d)
of the Securities Exchange Act of 1934 that are incorporated by reference in the
registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
The undersigned registrant hereby undertakes that, for the purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offering therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
II-3
SIGNATURES
Pursuant to 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 for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized in the City of Plantation, State of Florida, on May 27, 2003.
VIRAGEN, INC.
By: /s/ Robert C. Salisbury
------------------------------------------
Robert C. Salisbury
President and Principal Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated.
SIGNATURE TITLE DATE
------------------------------ -------------------------------------------------------- ---------------------------
/s/ Carl N. Singer Chairman of the Board of Directors and Chairman of the May 27, 2003
------------------------------ Executive Committee
Carl N. Singer
/s/ Robert C. Salisbury President, Principal Executive Officer and Director May 27, 2003
------------------------------
Robert C. Salisbury
/s/ Dennis W. Healey Executive Vice President, Treasurer, Principal May 27, 2003
------------------------------ Financial Officer, Director and Secretary
Dennis W. Healey
/s/ Douglas Lind Director May 27, 2003
------------------------------
Douglas Lind
/s/ Charles J. Simons Director and Chairman of the Audit and Finance May 27, 2003
------------------------------ Committee
Charles J. Simons
/s/ Gerald Smith Director May 27, 2003
------------------------------
Gerald Smith
/s/ Nicholas Burke Controller and Principal Accounting Officer May 27, 2003
------------------------------
Nicholas Burke
II-4
INDEX TO EXHIBITS
EXHIBIT NUMBER DESCRIPTION OF DOCUMENT
-------------- -----------------------
5.1 Opinion and Consent of Schneider Weinberger LLP (includes
Exhibit 23.2)
10.76 Additional Funding Agreement dated May 13, 2003 between
Viragen, Inc. and Bristol Investment Fund, Ltd.
23.1 Consent of Independent Certified Public Accountants
23.2 Consent of Schneider Weinberger LLP (included in Exhibit
5.1)
II-5