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  May 31, 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 May 31, 1997 was 795,011.



<PAGE>



                        VIROGROUP, INC. AND SUBSIDIARIES
                               INDEX TO FORM 10-Q
                           QUARTER ENDED MAY 31, 1997

                                                                           Page
                                                                           ----

Part I- Financial Information

Consolidated Balance Sheets
 May 31, 1997 and August 31, 1996                                            3

Consolidated Statements of Operations
 Three Months Ended May 31, 1997 and
 May 31, 1996                                                                4

Consolidated Statements of Operations
 Nine Months Ended May 31, 1997 and
 May 31, 1996                                                                5

Consolidated Statements of Cash Flows
 Nine Months Ended May 31, 1997 and
 May 31, 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
                        MAY 31, 1997 AND AUGUST 31, 1996
<TABLE>
<CAPTION>

                                                                     May 31         August 31,
                                                                      1997             1996
                                                                   -----------      -----------
                                                                   (Unaudited)
<S>                                                                <C>              <C>        
                                    ASSETS
CURRENT ASSETS:
    Cash and cash equivalents....................................  $    81,479      $   191,001
    Accounts receivable, net of allowance for doubtful
      accounts of $448,801, and $502,551, respectively...........    1,608,991        3,384,426
    Unbilled accounts receivable.................................      553,577          717,946
    Prepaid income taxes.........................................       18,371           26,840
    Prepaid expenses and other...................................      719,791          204,313
                                                                   -----------      -----------
          Total current assets...................................    2,982,209        4,524,526

AMOUNTS DUE FROM STATE AGENCY, net...............................      534,427        2,812,737
PROPERTY AND EQUIPMENT, net......................................      394,599          543,746
OTHER ASSETS.....................................................       34,534           35,261
                                                                   -----------      -----------
          Total assets...........................................  $ 3,945,769      $ 7,916,270
                                                                   ===========      ===========

                         LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
    Accounts payable.............................................  $   341,933      $ 1,160,354
    Accrued liabilities..........................................    1,748,409        1,197,026
    Current maturities of long-term debt.........................          493            9,447
    Notes payable................................................      542,768        2,491,429
                                                                   -----------      -----------
          Total current liabilities..............................    2,633,603        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 May 31, 1997............................................        7,950            7,950
    Additional paid-in capital...................................   18,333,536       18,333,536
    Accumulated deficit..........................................  (17,029,320)     (15,283,472)
                                                                   -----------      -----------
          Total shareholders' equity.............................    1,312,166         3,058,014
                                                                   -----------       -----------
                                                                   $ 3,945,769      $ 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 May 31, 1997 and May 31, 1996
                                   (Unaudited)



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

GROSS REVENUES .................................    $ 1,512,789     $ 3,461,519

COST OF GROSS REVENUES .........................      1,066,891       2,366,963
                                                    -----------     -----------
    Gross profit ...............................        445,898       1,094,556

SELLING, GENERAL & ADMINISTRATIVE EXPENSES,
    including rentals to related party of
    $46,500 in 1997 and 1996 ...................      1,045,136       1,638,065
                                                    -----------     -----------

    Loss from operations .......................       (599,238)       (593,509)

OTHER INCOME (EXPENSE):
    Net interest expense .......................        (42,971)        (44,319)
    Other, net .................................         15,948            (884)
                                                    -----------     -----------

    Loss before income taxes ...................       (626,261)       (638,712)

PROVISION FOR INCOME TAXES .....................           (793)        (86,062)
                                                    -----------     -----------

    Net loss ...................................    $  (627,054)    $  (724,774)
                                                    ===========     ===========

NET LOSS PER SHARE COMMON SHARE ................    $      (.79)    $      (.91)
                                                    ===========     ===========

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
                 Nine Months Ended May 31, 1997 and May 31, 1996
                                   (Unaudited)



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

GROSS REVENUES .................................   $  5,683,545    $ 11,022,003

COST OF GROSS REVENUES .........................      4,105,204       7,481,766
                                                   ------------    ------------
    Gross profit ...............................      1,578,341       3,540,237

SELLING, GENERAL & ADMINISTRATIVE EXPENSES,
    including rentals to related party of
    $93,000 in 1997 and 1996 ...................      3,246,780       4,630,292
                                                   ------------    ------------

    Loss from operations .......................     (1,668,439)     (1,090,055)

OTHER INCOME (EXPENSE):
    Net interest expense .......................       (153,257)       (136,929)
    Other, net .................................         76,648           7,123
                                                   ------------    ------------

    Loss before income taxes ...................     (1,745,048)     (1,219,861)

PROVISION FOR INCOME TAXES .....................           (802)         (3,578)
                                                   ------------    ------------

    Net loss ...................................   $ (1,745,850)   $ (1,223,439)
                                                   ============    ============

NET LOSS PER SHARE COMMON SHARE ................   $      (2.20)   $      (1.53)
                                                   ============    ============

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
                 Nine Months Ended May 31, 1997 and May 31, 1996
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                                   1997           1996
                                                              -----------    -----------
<S>                                                           <C>            <C>         
CASH FLOWS FROM OPERATING ACTIVITIES:
    Net loss ..............................................   $(1,745,850)   $(1,223,439)
                                                              -----------    -----------
    Adjustments to reconcile net loss to net
      cash provided by (used in) operating activities
       Depreciation and amortization ......................       237,780        299,755
       Provision for bad debts ............................        56,420         29,864
       (Gain) loss on disposition of property and equipment       (22,415)         6,152
       Restructuring charge ...............................       (92,837)        17,093
       Relocation charge ..................................        42,000              0
       Changes in assets and liabilities:
         Decrease (increase) in-
           Accounts receivable ............................     1,719,015        206,363
           Unbilled accounts receivable ...................       164,368        522,104
           Prepaid income taxes ...........................         8,469        128,960
           Prepaid expenses and other assets ..............     1,721,830        104,729
         Increase (decrease) in-
           Accounts payable ...............................      (818,419)      (673,618)
           Accrued liabilities ............................       643,949       (225,965)
                                                              -----------    -----------
           Total adjustments ..............................     3,660,160        415,436
                                                              -----------    -----------
      Net cash provided by (used in) operating activities .     1,914,310       (808,002)
                                                              -----------    -----------

CASH FLOWS FROM INVESTING ACTIVITIES:
    Purchases of property and equipment ...................       (98,603)       (32,874)
    Proceeds from sale of property and equipment ..........        32,385         28,992
                                                              -----------    -----------
      Net cash provided by (used in) investing activities .       (66,218)        (3,882)
                                                              -----------    -----------

CASH FLOWS FROM FINANCING ACTIVITIES:
    Proceeds from notes payable ...........................     4,591,790      7,286,493
    Repayment of notes payable ............................    (6,540,449)    (6,376,961)
    Repayment of long-term debt ...........................             0       (109,365)
    Repayment of capitalized lease obligations ............        (8,955)       (22,061)
                                                              -----------    -----------
      Net cash provided by (used in) financing activities .    (1,957,614)       778,105
                                                              -----------    -----------

DECREASE IN CASH AND CASH EQUIVALENTS .....................      (109,522)       (33,779)

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

CASH AND CASH EQUIVALENTS, end of period ..................   $    81,479    $    71,014
                                                              ===========    ===========

SUPPLEMENTAL DISCLOSURES:

    Interest paid .........................................   $   153,257    $   136,929
                                                              ===========    ===========

    Income taxes paid .....................................   $         8    $    24,246
                                                              ===========    ===========
</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
                                 MAY 31, 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 May 31, 1997 and the results of operations and cash flows for the three-month
and nine-month periods ended May 31, 1997 and May 31, 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
the Company's  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 May 31, 1997 these  allowances  totaled  $913,918 with $166,623  applied as a
valuation  allowance to the amounts due, resulting in a net of $534,427 shown as
the Amounts Due From State Agency, net, in the consolidated balance sheet at May
31,  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 sold to third party  financing  entities at May 31,
1997.  The  Company  has no recourse  on these  transactions.  The Company  used
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. In addition the Company
filed approximately $703,050 directly with the State.

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  has placed 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 accrue
to the  Company's  benefit  and is  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 May 31, 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







                                  Page 9 of 18


<PAGE>


up to $3.0  million at an interest  rate of prime  (8.50% at May 31,  1997) less
 .25%.  Laidlaw,  Inc. in lieu of its commitment to provide up to $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 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 nine month  period  ending May 31,  1997,
$92,837 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 $81,235 which is included in accrued liabilities
in the  accompanying  consolidated  balance sheet at May 31, 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
fourth  quarter of fiscal  1997.  The  Company  accrued a  relocation  charge of
$42,000 which represents employee severances. This relocation charge is included
in accrued  liabilities in the accompanying  consolidated  balance sheet, at May
31, 1997.

(7)     Significant Customer Disclosure

The Company  operates in one  industry  segment,  as  contemplated  by Financial
Accounting  Standards  Board  Statement No. 14. During the nine months ended May
31, 1997,  Inter-City  Corp.  "USA"  accounted  for  approximately  10% of total
Company  revenues.  Laidlaw  Environmental  Services,  Inc. and its  affiliates,
Southern Wood Products,  and the State of Tennessee  accounted for 8%, 7% and 6%
of consolidated gross revenues,  respectively. At May 31, 1997, amounts due from
these customers aggregated $319,463,  and are included in "accounts  receivable,
net" in the accompanying consolidated balance sheet.







                                Page 10 of 18


<PAGE>

(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.

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

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

COMPARISON OF THREE MONTHS ENDED MAY 31, 1997 AND MAY 31, 1996.  Gross  revenues
decreased by 56% to $1,512,789 for the three months ended May 31, 1997, compared
to  $3,461,519  for the same  period of fiscal year 1996.  This 56%  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                May 31, 1997 May 31, 1996             (Decrease)
      --------             -------------------------------          ----------

Enviro Florida             $  398,003           $  942,009              (58)

Enviro South Carolina         445,765            1,104,056              (60)

Enviro Tenn                   468,097              994,335              (53)
                           ----------           ----------

TOTAL ENVIRO DIVISION      $1,311,865           $3,040,400              (57)

HYDRO DIVISION                200,924              421,119              (53)
                           ----------           ----------

TOTAL VIROGROUP, INC.      $1,512,789           $3,461,519              (56)
                           ==========           ==========


Florida  operations  had a decrease in gross revenues of $544,006 (58%) 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 $658,291 (60%) was
due to a  reduction  in  work  assignment  by the  office's  major  client.  The
Tennessee gross revenues  decrease of $526,238 (53%) was primarily the result of
completing a single large remediation  project during the third 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 $220,195
(53%) is mainly the result of a large injection well project which was completed
during the third  Quarter of fiscal 1996,  and there was no large project in the
third quarter of fiscal 1997 to replace that job.


                                  Page 11 of 18

<PAGE>


Contracted backlog at May 31, 1997 is $3.4 million.  The backlog is no assurance
as to future gross revenue levels.

Cost of gross  revenues is 70.5% of revenues  for the three months ended May 31,
1997,  compared to 68.4% for the three months ended May 31, 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.

Selling,  general and administrative expenses for the three months ended May 31,
1997  decreased  by  approximately  $592,929  (36%) to  $1,045,136  compared  to
$1,638,065  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 remained the same due to a flat demand in amounts borrowed.

The net loss for the three months ended May 31, 1997 was  $627,054,  or 41.4% of
gross revenues, compared to a net loss of $724,774, or 20.9% 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  NINE  MONTHS  ENDED  MAY 31,  1997 AND MAY 31,  1996.  Gross
revenues  decreased by 48% to $5,683,545 for the nine months ended May 31, 1997,
compared  to  $11,022,003  for the same  period of fiscal  year  1996.  This 48%
decrease in gross revenues results from changes in gross revenues in each of the
Company's divisions as follows:

                                  Gross Revenues For the
                                     Nine Months Ended             % Increase
     Division                    May 31, 1997 May 31, 1996         (Decrease)
      --------                -------------------------------      ----------

Enviro Florida                $1,407,895           $3,758,561           (62)

Enviro South Carolina          1,629,676            3,310,961           (50)

Enviro Tenn                    2,039,543            2,412,148           (15)
                              ----------           ----------

TOTAL ENVIRO DIVISION         $5,077,114           $9,481,670           (46)

HYDRO DIVISION                   606,431            1,540,333           (60)
                              ----------           ----------

TOTAL VIROGROUP, INC.         $5,683,545           $11,022,003          (48)
                              ==========           ===========          


Florida operations had a decrease in gross revenues of $2,350,666 (62%) 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 $1,681,285  (50%) was
due to a general  decline in repeat  business  as that  office's  major  clients
decrease in their  spending  on  environmental  projects.  The  Tennessee  gross


                                Page 12 of 18


<PAGE>


revenues  were  substantially  the same for the nine  month  period.  The  Hydro
Division  gross  revenues  decrease of $933,902  (60%) is mainly the result of a
large injection well project which finished in the third quarter of fiscal 1996.

Cost of gross revenues is 72.2% for the nine months ended May 31, 1997, compared
to 67.9% for the same  period of the prior  year.  This  increase in cost is the
result of a larger percentage of gross revenue being generated by subcontractors
than in prior years.  Revenues from subcontractors  carry a smaller gross profit
than revenues from professional fees.

Selling,  general and administrative  expenses for the nine months ended May 31,
1997  decreased by $1,383,512 or 29.9% to $3,246,780  compared to $4,630,292 for
the same period of fiscal  1996.  The  majority of the  decrease is due to staff
downsizing and reductions in fixed expenses.

The Company has not  provided a provision  for Federal  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 timing
of the future  federal and state  taxable  income  which will be  sufficient  to
utilize the deferred tax asset.

The net loss for the nine months ended May 31, 1997 was $1,745,850,  or 30.7% of
gross revenues  compared to a net loss of $1,223,439 or 11.1% 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 $1,914,310. The cash was
generated by the  collection of accounts  receivable and the third party funding
of the Florida UST program  amounts.  The payment of accounts  payable and other
accrued liabilities totalling  approximately  $820,000 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 the
Company's  line of  credit.  As of May 31,  1997 the  Company's  line of  credit
balance was $542,768.







                                  Page 13 of 18


<PAGE>



Working  capital on May 31, 1997 increased by $682,336 as compared to August 31,
1996. Accounts receivable,  net, and unbilled accounts receivable decreased by a
combined  amount of $1,939,804 as a result of the completion of work in progress
at August  31,  1996,  as well as the  result of a  decline  in gross  revenues.
Accounts payable and accrued liabilities at May 31, 1997 decreased by a total of
$267,038,  for the same period. 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 May 31,
1997 was 8.50%.  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
                       -------------       -------------        --------------


Subsequent to the vote of the security  holders at the annual meeting on January
23, 1997,  Ivan R. Cairns resigned from the Board and has been replaced by James
J.  Hattler.  James L. Wareham has also resigned as of June 24, 1997 and has not
yet been replaced.

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.

27      Financial Data Schedule (Electronic filing only). 


Reports on Form 8-K

None



































                                  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:  July 10, 1997                    By:    /s/ Charles S. Higgins, Jr.
                                             -----------------------------------
                                             Charles S. Higgins, Jr., President
                                             and Chief Executive Officer


Date:  July 10, 1997                    By:   /s/ DeWayne Baskette
                                             -----------------------------------
                                             DeWayne Baskette
                                             Chief Financial Officer





























                                  Page 17 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:  July 10, 1997                    By:
                                             -----------------------------------
                                             Charles S. Higgins, Jr., President
                                             and Chief Executive Officer

Date:  July 10, 1997                    By:  -----------------------------------
                                             DeWayne Baskette
                                             Chief Financial Officer


































                                Page 18 of 18