SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                    FORM 10-Q



    X             QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
----------        THE SECURITIES EXCHANGE ACT OF 1934

                  For the quarterly period ended  February 28, 1997

                  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
----------        OF THE SECURITIES AND EXCHANGE ACT OF 1934

                  For the transition period from_________to_________

                           Commission File No. 0-19350

                                ViroGroup, Inc.

             (Exact name of registrant as specified in its charter)

          Florida                                               59-1671036
-------------------------------                            --------------------
(State or other jurisdiction of                            (I.R.S. Employer
 incorporation or organization)                             Identification No.)



     428 Pine Island Road SW
       Cape Coral, Florida                                   33991
---------------------------------------                    ----------  
(Address of principle executive office)                    (zip code)

Registrant's telephone number including area code:  (941) 574-1919
                                                    --------------
   
Indicated  by check  mark  whether  the  registrant  (1) has filed  all  reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days.

                                   Yes      X          No
                                       -----------        -----------

The number of shares  outstanding  of the  registrant's  common stock,  $.01 Par
Value, as of February 28, 1997 was 795,011.









                                  Page 1 of 18


<PAGE>



                        VIROGROUP, INC. AND SUBSIDIARIES
                               INDEX TO FORM 10-Q
                         QUARTER ENDED FEBRUARY 28, 1997

                                                                           Page
                                                                           ----

Part I- Financial Information

Consolidated Balance Sheets
 February 28, 1997 and August 31, 1996                                       3

Consolidated Statements of Operations
 Three Months Ended February 28, 1997 and
 February 29, 1996                                                           4

Consolidated Statements of Operations
 Six Months Ended February 28, 1997 and
 February 29, 1996                                                           5

Consolidated Statements of Cash Flows
 Six Months Ended February 28, 1997 and
 February 29, 1996                                                           6

Notes to Consolidated Financial Statements                                   7

Management's Discussion and Analysis of
  Financial Condition and Results of Operations                             11


Part II - Other Information                                                 15


Signature Page                                                              17




















                                  Page 2 of 18

<PAGE>

                        VIROGROUP, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                      FEBRUARY 28, 1997 AND AUGUST 31, 1996
<TABLE>
<CAPTION>

                                                                   February 28,     August 31,
                                                                      1997             1996
                                                                   -----------      -----------
                                                                   (Unaudited)
<S>                                                                <C>              <C>   
                                    ASSETS
CURRENT ASSETS:
    Cash and cash equivalents....................................  $    57,500      $   191,001
    Accounts receivable, net of allowance for doubtful
      accounts of $448,801, and $502,551, respectively...........    1,814,114        3,384,426
    Unbilled accounts receivable.................................      439,493          717,946
    Prepaid income taxes.........................................       21,684           26,840
    Prepaid expenses and other...................................      820,199          204,313
                                                                   -----------      -----------
          Total current assets...................................    3,152,990        4,524,526

AMOUNTS DUE FROM STATE AGENCY, net...............................      536,553        2,812,737
PROPERTY AND EQUIPMENT, net......................................      454,152          543,746
OTHER ASSETS.....................................................       31,558           35,261
                                                                   -----------      -----------
                                                                   $ 4,175,253       $ 7,916,270
                                                                   ===========       ===========

                         LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
    Accounts payable.............................................  $   448,330      $ 1,160,354
    Accrued liabilities..........................................    1,784,906        1,197,026
    Current maturities of long-term debt.........................        2,784            9,447
    Notes payable................................................         ---         2,491,429
                                                                   -----------      -----------
          Total current liabilities..............................    2,236,020        4,858,256
                                                                   -----------      -----------

COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS' EQUITY:
    Preferred stock, $.01 par value, 50,000,000 shares
      authorized, 0 shares outstanding...........................        ---               ---
    Common stock, $.01 par value, 50,000,000 shares
      authorized, 795,011 issued and outstanding at
      August 31, 1996 and 795,011 issued and outstanding
      at February 28, 1997.......................................        7,950            7,950
    Additional paid-in capital...................................   18,333,536       18,333,536
    Accumulated deficit..........................................  (16,402,253)     (15,283,472)
                                                                   -----------      -----------
          Total shareholders' equity.............................    1,939,233        3,058,014
                                                                   -----------      -----------
                                                                   $ 4,175,253      $ 7,916,270
                                                                   ===========      ===========

</TABLE>






           The accompanying notes to consolidated financial statements
                  are an integral part of these balance sheets.




                                  Page 3 of 18

<PAGE>




                        VIROGROUP, INC. AND SUBSIDIARIES
               CONSOLIDATED STATEMENTS OF OPERATIONS Three Months
                  Ended February 28, 1997 and February 29, 1996
                                   (Unaudited)



                                                     1997             1996
                                                  -----------      -----------

GROSS REVENUES..................................  $ 1,476,247      $ 3,394,835

COST OF GROSS REVENUES .........................    1,128,012        2,214,193
                                                  -----------      -----------
    Gross profit................................      348,235        1,180,642

SELLING, GENERAL & ADMINISTRATIVE EXPENSES,
    including rentals to related party of
    $46,500 in 1997 and 1996....................    1,095,584        1,534,367
                                                  -----------      -----------

    Loss from operations........................     (747,349)        (353,725)

OTHER INCOME (EXPENSE):
    Net interest expense........................      (61,837)         (43,875)
    Other, net..................................       21,550            2,734
                                                  -----------      -----------

    Loss before income taxes ...................     (787,636)        (394,866)

BENEFIT FOR INCOME TAXES........................            0          (19,825)
                                                  -----------      -----------

    Net loss....................................  $  (787,636)     $  (375,041)
                                                  ===========      ===========

NET LOSS PER SHARE COMMON SHARE.................  $      (.99)     $      (.47)
                                                  ===========      ===========

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING......      795,011          795,011
                                                  ===========      ===========



                The accompanying notes to consolidated financial
              statements are an integral part of these statements.





                                  Page 4 of 18


<PAGE>



                        VIROGROUP, INC. AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF OPERATIONS Six Months
                  Ended February 28, 1997 and February 29, 1996
                                   (Unaudited)



                                                     1997             1996
                                                  -----------      -----------

GROSS REVENUES..................................  $ 4,170,756      $ 7,560,485

COST OF GROSS REVENUES .........................    3,038,311        5,114,786
                                                  -----------      -----------
    Gross profit................................    1,132,445        2,445,699

SELLING, GENERAL & ADMINISTRATIVE EXPENSES,
    including rentals to related party of
    $93,000 in 1997 and 1996....................    2,201,645        2,942,226
                                                  -----------      -----------

    Loss from operations........................   (1,069,200)        (496,527)

OTHER INCOME (EXPENSE):
    Net interest expense........................     (104,411)         (90,861)
    Other, net..................................       54,836            6,260
                                                  -----------      -----------

    Loss before income taxes ...................   (1,118,775)        (581,128)

PROVISION (BENEFIT) FOR INCOME TAXES............            8          (16,967)
                                                  -----------      -----------

    Net loss....................................  $(1,118,783)     $  (564,161)
                                                  ===========      ===========

NET LOSS PER SHARE COMMON SHARE.................  $     (1.41)     $      (.71)
                                                  ===========      ===========

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING......      795,011          795,011
                                                  ===========      ===========



                The accompanying notes to consolidated financial
              statements are an integral part of these statements.







                                  Page 5 of 18


<PAGE>

                        VIROGROUP, INC. AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF CASH FLOWS Six Months
                  Ended February 28, 1997 and February 29, 1996
                                   (Unaudited)
<TABLE>
<CAPTION>

                                                                      1997             1996
                                                                   -----------      -----------
<S>                                                                <C>              <C>   
CASH FLOWS FROM OPERATING ACTIVITIES:
    Net loss.....................................................  $(1,118,783)     $  (564,161)
                                                                   -----------      -----------
    Adjustments to reconcile net loss to net
      cash provided by (used in) operating activities
       Depreciation and amortization.............................      167,751          201,367
       Provision for bad debts...................................       42,571          (13,630)
       (Gain) loss on disposition of property and equipment......      (16,958)           3,360
       Changes in assets and liabilities:
         Decrease (increase) in-
           Accounts receivable...................................    1,527,740          127,792
           Unbilled accounts receivable..........................      278,453          529,380
           Prepaid income taxes..................................        5,156          (25,023)
           Prepaid expenses and other assets.....................    1,622,272          (43,729)
         Increase (decrease) in-
           Accounts payable......................................     (712,021)        (559,908)
           Accrued liabilities...................................      629,608         (333,514)
                                                                   -----------      -----------
           Total adjustments.....................................    3,544,572         (113,905)
                                                                   -----------      -----------
      Net cash provided by (used in) operating activities........    2,425,789         (678,066)
                                                                   -----------      -----------

CASH FLOWS FROM INVESTING ACTIVITIES:
    Purchases of property and equipment..........................      (86,262)         (14,813)
    Proceeds from sale of property and equipment.................       25,062           28,097
                                                                   -----------      -----------
      Net cash provided by (used in) investing activities........      (61,200)          13,284
                                                                   -----------      -----------

CASH FLOWS FROM FINANCING ACTIVITIES:
    Proceeds from notes payable..................................    3,320,914        5,371,161
    Repayment of notes payable...................................   (5,812,342)      (4,614,180)
    Repayment of long-term debt..................................            0         (108,504)
    Repayment of capitalized lease obligations...................       (6,662)         (16,433)
                                                                   -----------      -----------
      Net cash provided by (used in) financing activities........   (2,498,090)         605,044
                                                                   -----------      -----------

DECREASE IN CASH AND CASH EQUIVALENTS............................     (133,501)         (59,738)

CASH AND CASH EQUIVALENTS, beginning of period...................      191,001          104,793
                                                                   -----------      -----------

CASH AND CASH EQUIVALENTS, end of period.........................  $    57,500      $    45,055
                                                                   ===========      ===========

SUPPLEMENTAL DISCLOSURES:

    Interest paid................................................  $   110,276      $    92,610
                                                                   ===========      ===========

    Income taxes paid............................................  $         8      $     8,857
                                                                   ===========      ===========
</TABLE>

           The accompanying notes to consolidated financial statements
                    are an integral part of these statements.

                                   Page 6 of 18

<PAGE>



                        VIROGROUP, INC., AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                FEBRUARY 28, 1997
                                   (UNAUDITED)


(1)     Basis of Presentation

The  consolidated  balance  sheet as of August 31, 1996,  which has been derived
from  audited  statements,  and the  unaudited  interim  consolidated  financial
statements  included  herein,  have  been  prepared  pursuant  to the  rules and
regulations of the Securities and Exchange  Commission.  Certain information and
note disclosures  normally included in annual financial  statements  prepared in
accordance with generally accepted accounting  principles have been condensed or
omitted pursuant to those rules and  regulations,  although the Company believes
that the  disclosures  made are adequate to make the  information  presented not
misleading.

In the opinion of the Company, the accompanying unaudited consolidated financial
statements  contain  all  adjustments   (consisting  of  only  normal  recurring
accruals)  necessary to present fairly the financial  position of the Company as
of  February  28,  1997 and the  results  of  operations  and cash flows for the
three-month and six-month periods ended February 28, 1997 and February 29, 1996.

The accounting  policies followed for quarterly financial reporting purposes are
the  same as those  disclosed  in the  Company's  audited  financial  statements
contained in its Annual  Report on Form 10-K for the year ended August 31, 1996,
as filed with the Securities and Exchange Commission.

(2)     One-for-Eight Reverse Stock Split

On January 23, 1997, the Company implemented a one-for-eight reverse stock split
of the Company's  common stock.  The effect of the reverse split upon holders of
common  stock is that the total number of shares of the  Company's  common stock
held by each shareholder was  automatically  converted into that number of whole
shares of common  stock  equal to the  number  of shares of common  stock  owned
immediately  prior to the  reverse  split  divided  by eight,  adjusted  for any
fractional shares.

The reverse split was  effectuated to enable the Company to remain in compliance
with the  listing  criteria  of the  Nasdaq  SmallCap  Market.  There  can be no
assurance  that  the  reverse  split  will  result  in the  Company's  continued
compliance with Nasdaq listing requirements.










                                  Page 7 of 18


<PAGE>



The Company has an  authorized  capitalization  of  50,000,000  shares of common
stock, par value $.01 per share. The authorized capital stock of the Company was
not reduced or otherwise  affected by the reverse split. As of January 23, 1997,
the Company had  6,361,708  shares of common stock issued and  outstanding.  The
aggregate number of shares of common stock issued and outstanding  following the
reverse  split is 795,011.  All common  shares and per share  amounts  have been
adjusted to give retroactive effect of the reverse split.

(3)     Loss Per Share

Loss  per  share  is  calculated  by  dividing  net loss  attributed  to  common
shareholders  by the weighted  average  number of common shares and common share
equivalents  outstanding  during the periods.  Common share  equivalents are not
considered  for  periods  in which  there is a loss,  as their  impact  would be
antidilutive.  Primary  and  fully  diluted  loss per share are the same for all
periods presented.

(4)     Amounts Due From State Agency

During fiscal 1994, the Company  aggressively  expanded its participation in the
State  of  Florida  financed  programs  to  provide  environmental  services  to
evaluate,  assess and remediate contaminated  underground petroleum storage tank
sites. Through its Inland Protection Trust Fund, the State of Florida reimburses
certain  costs to clean up  eligible  contaminated  sites.  Primarily  due to an
estimated  unfunded  $450 million  backlog and annual tax revenue  allocation of
only $100 million, in March 1995 new legislation directed the Florida Department
of  Environmental   Protection  to  cease   processing,   with  certain  limited
exceptions,  applications  for  reimbursement  of costs  to  clean up UST  sites
eligible for state funds.

In May, 1996 a new law (the "1996 Act") was passed which implemented significant
changes to the  reimbursement  program and addressed the estimated  $450 million
backlog of unpaid  claims.  The 1996 Act  provides  for the  elimination  of the
reimbursement  program  effective August 1, 1996 and requires all  reimbursement
applications to be submitted by December 31, 1996.  Also, the 1996 Act creates a
non-profit  public benefit  corporation,  which is expected to be operational by
the Summer of 1997, to finance the unpaid backlog.  This non-profit  corporation
is charged  with  financing  the  estimated  unpaid $450  million  backlog  with
certificates  of  indebtedness.  Payment  of  claims  will  be on a  first-come,
first-served  methodology based on application filing date and an assumed annual
allocation  rate of $100  million.  Claims paid will be subject to a 3.5% annual
discount in consideration of the anticipated  accelerated payment as compared to
the previously  expected period of 4 to 5 years. The Company estimates the State
will not make significant payments under the program until the fourth quarter of
fiscal 1997 and continue through the second quarter of fiscal 1998.







                                  Page 8 of 18


<PAGE>



The Company in prior fiscal years recorded  valuation  allowances on the amounts
due to reflect the State mandated discount and potential denied costs. At August
31, 1996 these allowances  totaled $931,665 with $889,937 applied as a valuation
allowance to the amounts due,  resulting in a net amount of $2,812,737  shown as
the Amounts Due from State Agency, net, in the accompanying consolidated balance
sheet at August 31,  1996.  The  consolidated  balance  sheet at August 31, 1996
includes $41,728 as an accrued  liability to reflect the Company's  liability to
pay discounts and denied costs on receivables financed by third-parties.

At February 28, 1997 these allowances  totaled $913,918 with $116,623 applied as
a valuation  allowance to the amounts due,  resulting in a net of $536,553 shown
as the Amounts Due From State Agency, net, in the consolidated  balance sheet of
February 28, 1997. The balance sheet also includes $747,295 which is included as
an accrued  liability to reflect the  Company's  liability to pay  discounts and
denied costs on receivables financed by third-parties.

All of the approximately $3.1 million in unfiled  reimbursement  applications at
August 31,  1996,  have been  financed  with third party  financing  entities at
February 28,  1997.  In addition  the Company had filed  approximately  $703,050
directly with the State.  The Company uses  third-party  financing to obtain the
cash from the  financing  entity  upon  application  filing  thus  avoiding  the
estimated 13 months to be paid by the State.  The cost of  borrowing  from these
third parties is less than the cost of borrowing through the Company's revolving
credit line.

Specifically,  the Company  has entered  into  several  arrangements  to finance
substantially  all the  claims to be filed  with the  State  for  reimbursement.
Generally,  these  arrangements  require  the  Company  to pay a 3 - 4%  prepaid
interest  fee at the time the  financing  entity  pays  the  Company.  This is a
non-refundable  fee to cover  administrative  costs and interest costs for up to
the first nine months. If the State has not paid the financing entity within the
first nine  months,  the  interest  costs are .6875%  per month  thereafter.  In
addition,  the  Company  must place 13% of the  amounts  financed in an interest
bearing  escrow  account to provide for  potential  state denied costs and state
mandated interest discount.  The interest earned on the escrowed amounts accrues
to the Company's  benefit and will be recorded as interest  income in the period
earned.

The Company  filed all  amounts  due from the State prior to the state  mandated
filing deadline of December 31, 1996.

(5)     Notes Payable

Notes  payable at February 28, 1997 and August 31,  1996,  consisted of advances
against a $3.0  million line of credit.  Under this line of credit,  the Company
may borrow up to $3.0  million at an interest  rate of prime  (8.25% at February
28, 1997) less .25%.  Laidlaw,  Inc. in lieu of its  commitment to provide up to





                                  Page 9 of 18


<PAGE>


$3.0  million in debt  financing  to the  Company  pursuant  to the terms of the
preferred stock conversion agreement of June 26, 1995, caused a letter of credit
to be issued to collateralize  the $3.0 million note.  Substantially  all of the
Company's  assets secure this  obligation to Laidlaw in the event of a draw upon
the letter of credit. The line of credit expired January 20, 1997 and the letter
of credit  expired  February 20, 1997. The line of credit was renewed on January
20, 1997 for a one-year period under the same terms and  conditions.  On January
21, 1997, the letter of credit was renewed for a one-year period,  also with the
same terms and conditions.

(6)     Restructuring Charge

Primarily due to the the 1996 Act and a continued decline in forecasted landfill
design work, as well as general  market  conditions,  the Company in fiscal 1996
implemented the third phase of its restructuring  program.  This action resulted
in a one-time restructuring charge to Operating Expenses in fiscal 1996 totaling
$326,428.  The restructuring  costs remaining to be paid at August 31, 1996 were
$174,072  and are  included  in  accrued  liabilities  in the  August  31,  1996
consolidated  balance sheet.  For the six month period ending February 28, 1997,
$69,115 was charged  against this accrual  primarily for employee  severance pay
and lease expenses on closed  offices.  The Company  believes the balance of the
accrued   restructuring   charge  of  $104,957  which  is  included  in  accrued
liabilities in the accompanying  consolidated balance sheet at February 28, 1997
is adequate to absorb the remaining estimated restructuring charges.

On February 18, 1997, the Company  announced plans to move its Corporate  office
to  Nashville,  TN. The  relocation is expected to be complete by the end of the
fiscal year.

(7)     Significant Customer Disclosure

The Company  operates in one  industry  segment,  as  contemplated  by Financial
Accounting  Standards  Board  Statement  No. 14.  During  the six  months  ended
February 28,  1997,  Laidlaw  Environmental  Services,  Inc. and its  affiliates
accounted for approximately 9% of total Company revenues. In addition, Intercity
Products,  State of Tennessee and Southern  Wood Piedmont  accounted for 13%, 9%
and 8%, of  consolidated  gross  revenues,  respectively.  At February 28, 1997,
amounts  due from these  customers  aggregated  $741,648,  and are  included  in
"accounts receivable, net" in the accompanying consolidated balance sheet.

(8)     Legal

The Company has been notified by the Environmental  Protection Agency, through a
General  Notice  Letter that the Company is a  potentially  liable  party at the
Florida Petroleum Reprocessors Site in Davie, Florida. However, at this time, no
estimate of the potential  liability can be calculated due to the limited amount
of  information  available.  This type of liability is an insurable risk and the
Company's  insurance  carrier  has been  notified.  The  insurance  policy has a
deductible  of  $250,000.  Company  management  is of the opinion  that  Company
liability, if any, will be minimal.




                                  Page 10 of 18


<PAGE>



               MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                      CONDITION AND RESULTS OF OPERATIONS

Results of Operations
---------------------

Comparison of three months ended February 28, 1997 and February 29, 1996.  Gross
revenues  decreased by 57% to $1,476,247 for the three months ended February 28,
1997,  compared to $3,394,835 for the same period of fiscal year 1996.  This 57%
decrease in gross revenues results from changes in gross revenues in each of the
Company's divisions as follows:


                               Gross Revenues For the
                                 Three Months Ended                 % Increase
          Division        February 28, 1997 February 29, 1996       (Decrease)
          --------        -----------------------------------       ----------

Enviro Florida                $  402,195           $1,165,069           (65)

Enviro South Carolina            404,390            1,093,776           (53)

Enviro Tenn                      514,713              661,604           (23)
                              ----------           ----------

TOTAL ENVIRO DIVISION         $1,321,298           $2,920,449           (55)

HYDRO DIVISION                   154,949              474,386           (68)
                              ----------           ----------

TOTAL VIROGROUP, INC.         $1,476,247           $3,394,835           (57)
                              ==========           ==========



Florida  operations  had a decrease in gross revenues of $762,874 (65%) from the
prior  year,  mainly due to the  curtailment  of the Florida  UST  program.  The
majority of the decrease in the South Carolina  operations of $689,386 (53%) was
due to a  reduction  in  work  assignment  by the  office's  major  client.  The
Tennessee  gross  revenues   decrease  of  $146,891  (23%)  was  the  result  of
substantially  completing a single large project which during the second Quarter
of 1996. Due to the special nature of this project, those revenues have not been
replaced in the current year.  The Hydro  Division  gross  revenues  decrease of
$319,437 (68%) is mainly the result of a large  injection well project which was
completed during the third Quarter of fiscal 1996.

Contracted  backlog at  February  28,  1997 is $1.6  million.  The backlog is no
assurance as to future gross revenue levels.

Cost of gross  revenues is 76.4% of revenues for the three months ended February
28, 1997,  compared to 65.2% for the three months ended February 29, 1996.  This
increase  results  primarily  from a larger  percentage of gross  revenues being
generated  through  subcontractors  which  yields a smaller  gross  profit  than
revenue from professional fees.

                                  Page 11 of 18

<PAGE>




Selling, general and administrative expenses for the three months ended February
28, 1997 decreased by  approximately  $439,000  (29%) to $1,095,584  compared to
$1,534,367  for the same period of the prior year.  The majority of the decrease
is due to staff downsizing and reductions in fixed expenses.

Net interest expense increased due to an increase in amounts borrowed.

The decrease in the benefit for income taxes  results  from the  utilization  of
additional  prior year tax loss  carrybacks.  Taxable losses generated in fiscal
year 1996 were carried back to fiscal year 1994. A tax loss carryforward remains
to be carried  forward and applied  against  taxable income  beginning in fiscal
year 1997.

The net loss for the three months ended February 28, 1997 was $787,636, or 53.4%
of gross  revenues,  compared to a net loss of  $375,041,  or 11.1% for the same
period of the prior year.  This increase is primarily the result of the decrease
in gross revenues, coupled with the decrease in the gross profit percentage.

Comparison  of the six months  ended  February  28, 1997 and  February 29, 1996.
Gross revenues  decreased by 45% to $4,170,756 for the six months ended February
28, 1997,  compared to $7,560,485 for the same period of fiscal year 1996.  This
45% decrease in gross revenues results from changes in gross revenues in each of
the Company's divisions as follows:

                                Gross Revenues For the
                                   Six Months Ended                 % Increase
          Division       February 28, 1997 February 29, 1996        (Decrease)
          --------       -----------------------------------        ----------

Enviro Florida               $1,009,890           $2,342,666            (57)

Enviro South Carolina         1,183,912            2,523,444            (53)

Enviro Tenn                   1,571,448            1,575,161             (1)
                             ----------            ---------

TOTAL ENVIRO DIVISION        $3,765,250           $6,441,271            (42)

HYDRO DIVISION                  405,506            1,119,214            (64)
                             ----------           ----------

TOTAL VIROGROUP, INC.        $4,170,756           $7,560,485            (45)
                             ==========           ==========              


Florida operations had a decrease in gross revenues of $1,332,776 (57%) from the
prior year,  largely due to a reduction of work in the Florida UST program.  The
majority of the decrease in South  Carolina  operations of $1,339,532  (53%) was
due to a general  decline  in repeat  business  as the  office's  major  clients
curtailed their spending on environmental projects. The Tennessee gross revenues
were  substantially the same for the six month period.  The Hydro Division gross
revenues  decrease of $713,708  (64%) is mainly the result of a large  injection
well project which finished in the third quarter of fiscal 1996.

                                  Page 12 of 18

<PAGE>



Cost of gross  revenues is 72.9% for the six months  ended  February  28,  1997,
compared to 67.7% for the same period of the prior year.  This  increase in cost
is  the  result  of  a  larger   percentage  of  gross   revenue   generated  by
subcontractors than by professional fees.  Revenues from subcontractors  carry a
smaller gross profit than revenues from professional fees.

Selling,  general and administrative  expenses for the six months ended February
28, 1997 decreased by  approximately  $741,000 or 25% to $2,201,645  compared to
$2,942,226  for the same period of fiscal 1996.  The majority of the decrease is
due to staff downsizing and reductions in fixed expenses.

Net interest  expense  increased due to an increase in interest rates as well as
in amounts  borrowed.  Other income,  net,  increased due to the  disposition of
fixed  assets and the receipt of an  insurance  settlement.  The Company has not
provided a provision for income taxes due to the current year's net loss and has
not recorded any tax benefit.  It has provided a 100% valuation allowance of the
deferred tax asset that results from federal and state net operating  loss carry
forwards due to the lack of  availability  of federal and state  taxable  income
within the carryback  period,  available under the federal and state tax laws as
well as the inability to determine the likelihood  that future federal and state
taxable income will be sufficient to utilize the deferred tax asset.

The net loss for the six months ended February 28, 1997 was $1,118,783, or 26.8%
of gross revenues compared to a net loss of $564,161, or 7.5% of gross revenues,
for the same period of the prior year.  This increase is primarily the result of
decreases in gross revenue and increases in cost of sales,  partially  offset by
decreases in selling, general and administrative expenses.

Liquidity and Capital Resources
-------------------------------

The Company's operating activities provided net cash of $2,425,789. The cash was
generated  by the  collection  of  accounts  receivable  and the  funding of the
Florida UST program  amounts.  The payment of accounts payable and other accrued
liabilities  totalling  approximately  $82,000 was  necessitated by State law to
complete  the  Florida UST  program  projects  in progress at year-end  prior to
filing for  reimbursement  by the State,  as well as other work in  progress  as
shown by the decrease in unbilled accounts receivable combined with the decrease
in accounts receivable.

The net  cash  provided  by  operating  activities  was  mainly  used to  reduce
borrowing from the Company's bank line of credit to zero at February 28, 1997.

Working capital on February 28, 1997 increased by $583,239 as compared to August
31, 1996. Accounts  receivable,  net, and unbilled accounts receivable decreased
by a combined  amount of  $1,848,765,  as a result of the  completion of work in
progress  at August  31,  1996,  as well as the  result  of a  decline  in gross







                                  Page 13 of 18

<PAGE>


revenues.  Accounts  payable  and  accrued  liabilities  at  February  28,  1997
decreased by a total of  $124,144.  This  decrease  results from the decrease in
gross revenues, as well as the payment of vendors as projects reach completion.

Inflation has not  significantly  affected the Company's  financial  position or
operations.  Borrowings  under the  Company's  $3.0  million line of credit bear
interest at the prime rate of the lender  less .25%.  The prime rate at February
28, 1997 was 8.25%.  No assurance can be given that  inflation or the prime rate
will not  significantly  fluctuate,  either of which could adversely  affect the
Company.












































                                  Page 14 of 18


<PAGE>



PART II - OTHER INFORMATION

ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

At the  Company's  annual  meeting  held on Thursday,  January 23,  1997,  seven
members were elected to the Board of  Directors  for a one year term.  The slate
for the 1997 Board of Directors  contained the following names:  Ivan R. Cairns,
A. Denny Ellerman,  Charles S. Higgins, Jr., Rick L. McEwen, Sylvester O. Ogden,
James L. Wareham, and Kenneth W. Winger.

Proxies were solicited  pursuant to Regulation 14 under the Securities  Exchange
Act of 1934 and there was no  solicitation  in  opposition  to the  nominees  of
management as listed in the proxy and all nominees were elected.


                          VOTES FOR         VOTES AGAINST       VOTES WITHHELD
                        -------------     -----------------   ------------------
                          5,482,059             230,837              648,812
                        -------------     -----------------   ------------------

Effectuation of a one-for-eight reverse stock split.


                          VOTES FOR         VOTES AGAINST       VOTES WITHHELD
                        -------------     -----------------   ------------------
                          5,113,779             589,517              658,412
                        -------------     -----------------   ------------------


Appointment of Arthur Andersen LLP as the Company's independent  accountants for
1997.


                          VOTES FOR         VOTES AGAINST       VOTES WITHHELD
                        -------------     -----------------   ------------------
                          5,127,485             583,311              650,912
                        -------------     -----------------   ------------------













                                  Page 15 of 18


<PAGE>



ITEM 6.    EXHIBITS AND REPORT ON FORM 8-K


10.0    Material Contracts

10.39   Loan Agreement, Line-of-Credit  Note and  Irrevocable  Letter of Credit,
        dated January 20, 1997. (1)

27      Financial Data Schedule (Electronic filing only)

 
Reports on Form 8-K

None

_________________________

(1) To be filed by amendment.



































                                  Page 16 of 18


<PAGE>



                                   SIGNATURES

Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.

                                 VIROGROUP, INC.




Date:  April 11, 1997                   By:    /s/ Charles S. Higgins, Jr.
                                             -----------------------------------
                                             Charles S. Higgins, Jr., President
                                             and Chief Executive Officer


Date:  April 11, 1997                   By:   /s/ DeWayne Baskette
                                             -----------------------------------
                                             DeWayne Baskette
                                             Chief Financial Officer




























                                  Page 17 of 18