<PAGE> 1
VISUAL EDGE SYSTEMS INC.
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number: 0-20995
For the transition period from _________________ to ______________________
VISUAL EDGE SYSTEMS INC.
DELAWARE 13-3778895
- ------------------------------- ---------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
2424 NORTH FEDERAL HIGHWAY, SUITE 100, BOCA RATON, FLORIDA 33431
(Address of principal executive offices)
(561) 750-7559
(Registrant's telephone number, including area code)
N/A
(Former name, former address and former fiscal year,
if changed since last report)
Indicate 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
---- ----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
As of May 13, 1997, the registrant had 4,715,000 shares of Common Stock
and 1,495,000 Redeemable Warrants outstanding.
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VISUAL EDGE SYSTEMS INC.
TABLE OF CONTENTS
<TABLE>
<S> <C>
PART I FINANCIAL INFORMATION
ITEM 1. Financial Statements:
Condensed Balance Sheets 3
March 31, 1997 and December 31, 1996
Condensed Statements of Operations 4
Three Months Ended March 31, 1997 and 1996
and year ended December 31, 1996
Condensed Statements of Cash Flows 5
Three Months Ended March 31, 1997 and 1996
and year ended December 31, 1996
Notes to Consolidated Condensed Financial Statements 6-10
ITEM 2 Management's Discussion and Analysis of Results of 11-12
Operations and Financial Condition
PART II OTHER INFORMATION 13-15
Signature 16
</TABLE>
2
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VISUAL EDGE SYSTEMS INC.
BALANCE SHEET
<TABLE>
<CAPTION>
(Unaudited)
March 31, 1997 December 31, 1996
-------------- -----------------
<S> <C> <C>
Assets
Current Assets:
Cash $ 963,042 $ 233,117
Cash Equivalents (see Note 3) - 0 -
Short Term Investments 950,210 1,869,052
Accounts Receivable 79,653
Inventory 47,652 36,747
Other Current Assets 534,611 380,756
----------- -----------
Total Current Assets 2,575,168 2,519,672
=========== ===========
Property, Plant & Equipment:
Mobile Production Units 1,519,879 951,653
Training and Processing 112,116 112,301
Product Development 435,093 407,184
Office Furniture & Equipment 191,419 144,808
Show and Exhibit 177,010 144,787
Depreciation (166,523) (135,908)
----------- -----------
Total Fixed Assets, Net 2,268,994 1,624,826
----------- -----------
Deferred Costs:
Video Production 447,405 447,404
Organizational 29,428 29,428
Financing 1,125,000
Marketing Development 226,962 226,962
Amortization (105,324) (87,324)
----------- -----------
Total Deferred Assets, Net 1,723,472 616,470
----------- -----------
Other Assets 23,401 23,202
=========== ===========
Total Assets $ 6,591,034 $ 4,784,170
=========== ===========
Liabilities & Equity
Bank Advances (see Note 8) 1,500,000 500,000
Accounts Payable $ 77,976 $ 333,114
Accrued Expenses 484,117 284,900
Other Current Liabilities 10,598 1,500
Current Maturities - Note Payable to Charter 221,062
Contingent Liability (see Note 3) - 0 -
----------- -----------
Total Current Liabilities 2,293,753 1,119,514
----------- -----------
Long-Term Liabilities
Note Payable to Charter Financial 507,937
----------- -----------
Total Liabilities 2,801,690 1,119,514
=========== ===========
Stockholders' Equity
Preferred Stock, 5,000,000 shares authorized,
none issued
Common stock, $.01 par value, 20,000,000 shares
authorized, 4,715,000 shares issued and outstanding 47,150 46,150
Additional Paid In Capital 7,630,284 6,481,159
Accumulated Deficit (3,888,090) (2,862,653)
----------- -----------
Total Stockholders' Equity 3,789,344 3,664,656
=========== ===========
Total Liabilities & Stockholders' Equity 6,591,034 4,784,170
=========== ===========
</TABLE>
3
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Visual Edge Systems Inc.
Statements of Operations
<TABLE>
<CAPTION>
Unaudited
---------------------------------
Year Ended Three Months Ended
December 31, March 31,
---------------------------------
1996 1997 1996
----------- ----------- ---------------
<S> <C> <C> <C>
Revenue $ -- $ 199,736 --
----------- ----------- -----------
Cost of Sales -- 229,117 --
----------- ----------- -----------
Gross Profit -- (29,381) --
----------- ----------- -----------
General and administrative expenses 1,552,062 559,341 118,028
Selling and marketing 264,772 190,063 459
One-time stock compensation expense (600,000) --
One-time non-cash stock severance expense 150,125
----------- ----------- -----------
2,416,834 899,529 118,487
----------- ----------- -----------
Operating Loss (2,416,834) (928,910) (118,487)
----------- ----------- -----------
Other:
Cash Expense:
Interest income 69,998 32,176 --
Interest expense (50,854) (3,705) (12,812)
Bridge financing costs: (see Note 8)
Financing Fee (25,000) --
Non-cash financing fees (100,000)
----------- ----------- -----------
19,144 (96,528) (12,812)
----------- ----------- -----------
Net Loss Before Income Taxes (2,397,690) (1,025,438) (131,299)
Provision for Income Taxes -- -- --
----------- ----------- -----------
Net Loss $(2,397,690) $(1,025,438) $ (131,299)
=========== =========== ===========
Loss Per Share $ (0.63) $ (0.25) $ (0.04)
=========== =========== ===========
Weighted Average Shares Outstanding 3,801,250 4,158,333 3,000,000
=========== =========== ===========
</TABLE>
4
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Visual Edge Systems Inc.
Statements of Cash Flow
<TABLE>
<CAPTION>
Unaudited
------------------------------
Year Ended Three Months Ended
December 31, March 31,
------------------------------------------------
1996 1997 1996
---- ---- ----
<S> <C> <C> <C>
Operating Activities:
Net Loss $(2,397,690) $(1,025,438) $ (131,299)
Adjustments to reconcile net loss to net
cash used in operating activities:
One-time stock compensation expense 600,000
Bridge loan financing expense 125,000
Severance pay expense 150,125
Depreciation and amortization 155,546 48,615 49,165
Changes in assets and liabilities:
Increase in accounts receivable (79,653)
Increase in other current assets (117,503) (14,760)
Increase in other assets (23,202) (200)
Increase in bank advances 1,000,000
Increase (decrease) in accounts payable 63,852 (255,138) (52,982)
Increase in accrued expenses 271,182 199,217 56,791
Increase in advanced royalties (300,000) (150,000)
Increase in other current liabilities 1,500 9,098
----------- ----------- -----------
Net Cash Used in Operating Activities (1,746,315) 6,865 (78,325)
----------- ----------- -----------
Investing Activities:
Capital expenditures (1,365,365) (674,783) --
Proceeds from the sale of short term investments 1,638,963 1,268,844
Increase in intangible assets (398,558)
Deferred Organization Costs -- --
Deferred financing costs (1,250,000) (25,000)
Purchases of short term investments (3,508,015) (350,000)
----------- ----------- -----------
Net Cash Used in Investing Activities (3,632,975) (1,005,939) (25,000)
----------- ----------- -----------
Financing Activities:
Proceeds from issuance of common stock 5,511,849
Repayment of borrowings (1,615,000) (617,126) 103,600
Proceeds from borrowings 1,715,000 2,346,125
----------- ----------- -----------
Net Cash Provided by Financing Activities 5,611,849 1,728,999 103,600
----------- ----------- -----------
Net Increase in Cash 232,559 729,925 275
Cash at Beginning of Period 558 233,117 558
----------- ----------- -----------
Cash at End of Period $ 233,117 $ 963,042 $ 833
=========== =========== ===========
Supplemental information:
Cash paid for interest $ 50,854 $ 3,705 $ 9,412
=========== =========== ===========
Cash paid for income taxes $ -- $ -- $ --
=========== =========== ===========
</TABLE>
5
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VISUAL EDGE SYSTEMS INC.
NOTES TO FINANCIAL STATEMENTS
March 31, 1997
(1) BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements have
been prepared in accordance with generally accepted accounting
principles for interim financial information. Accordingly,
they do not include all of the information and footnotes
required by generally accepted accounting principles for
complete financial statements. In the opinion of management,
all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been
included.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
Visual Edge Systems Inc. (the "Company") was organized to
develop and market personalized videotape golf lessons
featuring One-on-One instruction by leading professional
golfer Greg Norman. To date, the Company has focused its
efforts on developing video production technology which
digitally combines actual video footage of a golfer's swing
with a synchronized "split-screen" comparison to Greg Norman's
golf swing to produce a 45-minute One-on-One videotape golf
lesson. The Company's One-on-One personalized videotape golf
lesson analyzes a golfer's swing by comparing it to Greg
Norman's pre-recorded instructional commentary and analysis
and computer graphics to highlight important golf fundamentals
intended to improve a golfer's performance. The Company sells
its products under the name "One-on-One with Greg Norman".
The Company was incorporated in July 1994 and commenced
operations in January 1995. Since the Company's inception, it
has been primarily engaged in product development, market
development, testing technology, recruitment of key personnel,
raising capital and preparing the software, hardware and
videotape coaching instructions used in the production of its
products. As a consequence, the Company did not generate any
significant revenue and operated as a development stage
company through December 31, 1996. The Company commenced
generating revenue from its primary business activities during
the first quarter of this year.
In March 1997, the Company obtained $3,500,000 of additional
financing (see note 8).
(B) REVENUE RECOGNITION
Revenue from product sales is recognized as videotape products
are delivered to the customer and in accordance with
individual contracted terms. Royalties and license fees are
recorded as revenue when earned.
(C) FIXED AND INTANGIBLE ASSETS
Fixed assets are stated at cost. Depreciation is calculated on
the straight-line method over the estimated useful lives of
the assets (4 years).
6
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VISUAL EDGE SYSTEMS INC.
NOTES TO FINANCIAL STATEMENTS
(D) FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107,
"Disclosures About Fair Value of Financial Instruments",
requires disclosure of the fair value of certain financial
instruments. Cash, short-term investments, advance royalties
and other current assets as well as accounts payable, accrued
expenses and other current liabilities as reflected in the
financial statements approximate fair value because of the
short-term maturity of these instruments. The carrying value
of the note payable to bank at December 31, 1996 and the
borrowings against the line of credit at March 31, 1997
approximated fair value as the variable rates offered are
comparable to rates currently available to the Company.
(E) SHORT TERM INVESTMENTS
Short-term investments consist of discount notes and Treasury
bills and are available for sale. The difference between the
carrying value and fair value is immaterial at March 31, 1997.
(F) USE OF ESTIMATES
The preparation of financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from
those estimates.
(3) CASH EQUIVALENTS AND CONTINGENT LIABILITY
Management believes that the availability of all or a portion
of the funds raised in the Company's recent Bridge Financing
are the equivalent of cash and that any amounts withdrawn
represent a Contingent Liability (as opposed to a Bank
Advance), since the Company is not required to repay such
amounts. In order to emphasize the substance of this financing
arrangement and better reflect the Company's financial status,
captions entitled "Cash Equivalents" and "Contingent
Liability" are reflected on the accompanying balance sheet.
7
<PAGE> 8
VISUAL EDGE SYSTEMS INC.
NOTES TO FINANCIAL STATEMENTS
If under the Bridge Financing arrangement (see note 8), the
funds raised in the bridge financing are utilized and not
repaid and are thus converted to equity, at the Company's sole
and absolute discretion, the Company will have received $3.5
million of equity capital.
(4) FIXED ASSETS
Fixed assets consist of the following at March 31, 1997 and
December 31, 1996:
<TABLE>
<CAPTION>
UNAUDITED
---------
3/31/97 12/31/96
------- --------
<S> <C> <C>
Mobile video production units $ 1,519,879 $ 951,653
Product development equipment 435,093 407,184
Training and processing equipment 112,116 112,302
Office furniture and equipment 186,419 144,808
Show and exhibit displays 182,010 144,787
----------- -----------
2,435,517 1,760,734
Less accumulated depreciation (166,523) (135,908)
----------- -----------
$ 2,268,994 $ 1,624,826
</TABLE>
(5) LEASES
The Company has a noncancelable lease for office space that
expires in 1999. Rental payments include minimum rentals plus
building expenses. Rental expense for this lease for year to
date at March 31, 1997 was $25,614.
Future minimum lease payments under this lease as of
December 31, 1996 are:
Year Ending December 31,
1997 $102,452
1998 105,751
1999 90,512
---------
$298,715
The Company entered into a capitalized master lease and
equipment financing agreement with a financial institution which
permits the Company to finance its mobile video production units
of up to $840,000 through May, 2000 at an interest rate of
approximately 10%. At December 31, 1996, no amounts were drawn
against this master capital lease. For the period ending March
31, 1997, the Company financed seven mobile video production
units for $761,905 under this lease. Future payments under this
capital lease for each of the following three years is $344,470.
8
<PAGE> 9
VISUAL EDGE SYSTEMS INC.
NOTES TO FINANCIAL STATEMENTS
(6) COMMITMENTS AND CONTINGENCIES
Effective March 1, 1995 the Company entered into a license
agreement with Greg Norman ("Norman"), a professional golfer,
and his corporation, Great White Shark Enterprises, Inc. ("Great
White Shark"), pursuant to which the Company was granted a
worldwide license to use his name, likeness and endorsement in
connection with the production and promotion of the Company's
products. Norman will receive royalties of 8% of all net
revenues, as defined, derived from the sale of One-on-One
videotapes. The Company extended the agreement in 1996 and used
a portion of the proceeds from its private placement to pay the
initial $150,000 required to extend the agreement. The extension
of the agreement, which is for three additional years, requires
the Company to pay certain guaranteed fees, amounting to
$3,300,000, to be paid quarterly to Great White Shark and total
$600,000 (including the $150,000 payment referred to above) in
the year ending June 30, 1997, $1 million in the year ending
June 1998 and $1.7 million in the year ending June 30, 1999.
Such guaranteed payments will be credited against future 8%
royalties due on the Company's net revenues from the sale of the
One-on-One video. These payments are presented as advance
royalties on the balance sheet at December 31, 1996 and March
31, 1997. As the company generates revenue, the advance
royalties will be recorded as expense.
The Company has the right to renew the license agreement for two
additional periods of five years each. In the event of renewal,
the Company is obligated to make a guaranteed payment of
$1,300,000 during the first year of the renewal term, increasing
by $100,000 per year thereafter.
Also in March 1995, the Company's three founding shareholders
entered into an Agreement which gave Norman an option to receive
10% of the outstanding shares of the Company from them. The
option was conditioned upon the Company delivering a notice to
Norman that was intended to extend the License Agreement for
three years. In April 1996, Norman exercised the option and
those shareholders transferred 300,000 shares of their common
stock to Norman. The market value of such shares was $600,000.
In accordance with Accounting Principles Board Opinion ("APB")
No. 25, the transaction was recorded as a charge to the
statement of operations and an increase in additional paid-in
capital, in April 1996, with no impact on the Company's equity.
(7) EMPLOYMENT AGREEMENTS
The Company entered into employment agreements with seven
executive employees expiring through December 1998 which provide
for aggregate minimum annual compensation of approximately
$763,000 in 1997, and $888,000 in 1998. The agreements are
automatically renewed for additional one-year periods unless the
Company or the employees provide timely notice of termination.
Two of the employment agreements provide for an increase in
compensation commencing in July 1997, if the Company achieves
prescribed pre-tax earnings thresholds. The agreements also
provide for bonuses and severance payments ranging from three to
twelve months. In addition, two of the employment agreements
provide for options for each employee to purchase an aggregate
of up to 250,000 shares of common stock, at an exercise price
per share equal to the IPO price of $5 per share, which was the
per share price at the date of grant. Such options had a vesting
term of five years, subject to acceleration if the trading price
of the Common Stock reached certain thresholds. Specifically,
the vesting of 300,000 of such options would accelerate to the
date that the market price of the Common Stock equaled or
9
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VISUAL EDGE SYSTEMS INC.
NOTES TO FINANCIAL STATEMENTS
exceeded $10.00 per share for at least five consecutive trading
days prior to January 24, 1998, if such threshold is reached.
This threshold was achieved on February 7, 1997, at which time
such 300,000 options became exercisable. The vesting of the
remaining 200,000 options will be accelerated to the date that
the trading price of the Common Stock equals or exceeds $15.00
per share for at least five consecutive trading days on or
before January 24, 1999 if such threshold is reached. This
threshold has not yet been reached. The original option
agreement contained an error in that it did not include a
provision for the options to vest in five years. Such error was
corrected by revisions to the option agreements dated April 3,
1997.
(8) BRIDGE FINANCING AND SECURED LINE OF CREDIT
In March 1997, the Company consummated a bridge financing (the
"Bridge Financing") pursuant to which it issued to 13 investors,
(including Status-One Investments Inc., a company controlled by
Earl T. Takefman, the Chief Executive Officer of the Company),
as a financing fee an aggregate of (i) 100,000 shares of Common
Stock and (ii) 100,000 warrants to purchase 100,000 shares of
Common Stock at a price of $10.00 per share, subject to
adjustment in certain circumstances. As consideration for such
securities, the investors in the Bridge Financing pledged an
aggregate of $3,500,000 in cash and other marketable securities
as cash collateral (the "Cash Collateral") to Republic Bank of
New York (Canada) Ltd. ("Republic"), and Bank Hapoalim
(Switzerland) Ltd. ("Bank Hapoalim"), which in turn issued
stand-by letters of credit (the "Letters of Credit") to the
Company in the aggregate amount of up to $3,500,000, which
expire on December 31, 1997. The Company has used the Letters of
Credit to secure a $3,500,000 line of credit (the "Line of
Credit") from Barnett Bank. In the event that the Company draws
upon the Line of Credit such amounts may either be repaid on or
prior to December 31, 1997 or converted to equity at the
Company's discretion on December 31, 1997. If not repaid Barnett
Bank will present the Letters of Credit to Republic and Bank
Hapoalim, who will pay Barnett Bank amounts owed to it using the
Cash Collateral. In such instance, the investors in the Bridge
Financing will be issued additional shares of Common Stock by
the Company according to a predetermined formula to a maximum of
467,000 shares provided that the average of the closing bid
prices of the Common Stock on the Nasdaq Small Cap Market on
each of the twenty consecutive trading days immediately prior to
December 31, 1997, is greater than $11.00. Alternatively, if the
average of the closing bid prices of the Common Stock on Nasdaq
SmallCap Market on each of the twenty consecutive days
immediately prior to December 31, 1997, is less than $11.00, the
Company is obligated to issue to each investor in the Bridge
Financing a number of shares of Common Stock equal to (x) the
amount of such investor's unreturned Cash Collateral divided by
(y) one-half of the average of the closing bid prices of the
Common Stock on the Nasdaq SmallCap Market on each of the twenty
consecutive trading days prior to December 31, 1997.
As of March 31, 1997, the Company has utilized $1.25 million of
the Line of Credit.
10
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VISUAL EDGE SYSTEMS INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
RESULTS OF OPERATIONS
The Company was a developmental stage company in 1996 and had no revenue for the
fiscal year ended December 31, 1996. The Company commenced its introduction and
marketing of personalized videotape golf lessons, featuring One-on-One
instruction by leading professional golfer Greg Norman, during the fourth
quarter of 1996. The Company completed and launched its first seven mobile
production units (vans) during the three months ended March 31, 1997. Further,
the Company anticipates that an additional eight vans will be launched by the
end of May 1997.
During the first quarter of 1997 the Company began to generate revenue from the
sales of its videotape golf lessons. For the three months ending March 31, 1997,
the Company had sales of approximately $200,000 and had a negative gross profit
of $29,381. The negative gross profit resulted from the high fixed costs
associated with the seven vans that were launched in the quarter.
Selling and administrative expenses for the three month period were $780,748.
These expenses were start-up expenses, related to the launching of the seven
vans and consisted of payroll, marketing and other administrative expenses.
A significant portion of the Company's disbursements during the first quarter
represented investment in fixed assets of $644,000. At March 31, 1997, the
Company's cumulative investment in fixed assets was $2,268,994.
The Company earned $32,176 in interest income for the quarter ending March 31,
1997. Further, in connection with its bridge financing, the Company incurred
financing fees of $1,250,000, of which $1,000,000 was a non-cash expense. The
financing fee is pro-rated over a ten month period ending December 31, 1997.
Also, during the first quarter, the Company incurred a one time non-cash stock
severance expense of $150,125.
LIQUIDITY AND CAPITAL RESOURCES
In March 1997, the Company completed a $3,500,000 bridge financing facility
pursuant to which it issued to 13 investors (including Status-One Investments
Inc., a company controlled by Earl T. Takefman, the Chief Executive Officer of
the Company), in return for the investors' pledge of $3.5 million for
collateral, an aggregate of 100,000 shares of common stock and 100,000 warrants
(exercisable through March 26, 2002) to purchase 100,000 shares of common stock
at a price of $10.00 per share. The investors provided $3,500,000 in collateral
which resulted in the issuance of two letters of credit in favor of the
Company in the aggregate amount of $3,500,000, which expire on
December 31, 1997.
11
<PAGE> 12
Such letters of credit were used by the Company to secure a line of credit of
$3,500,000. If the line of credit is not repaid on or before December 31, 1997,
in whole or in part, the bank will draw on the letter of credit to satisfy the
repayment of the debt. In this event the investors would convert the unpaid
portion of the letter of credit into additional equity in the Company according
to a pre-determined formula.
The Company is continuing to explore permanent financing alternatives which it
expects to complete by year end.
SUBSEQUENT EVENTS
On May 9, 1997, the Company reached an agreement in principle with Cadillac
Motor Car Division of General Motors ("Cadillac"). The agreement grants Cadillac
the exclusive U.S. dealer showroom rights to the Company's One-on-One with Greg
Norman concept allowing Cadillac to exclusively offer its customers a free video
golf lesson with Greg Norman if they test drive a Cadillac. The Company is to
provide each participating dealership with all marketing materials related to
this promotion, including creative material for print and radio advertisements,
banners, posters and brochures. The launch of the promotion nationwide is not
expected until late in 1997, until after the Company and Cadillac conduct
regional tests to determine the appropriate logistics and marketing approach to
the proposed test drive program, at which time the Company anticipates that a
formal agreement will be signed. The contract, which would run until December
31, 2000, unless terminated earlier by Cadillac at their option, would guarantee
Visual Edge approximately 6,500 event days or $34,750,000 over the term,
provided that Visual Edge has an adequate number of vans to serve all
participating Cadillac dealers. The arrangement with Cadillac remains subject to
the execution of a formal agreement between the Company and Cadillac.
THIRD PARTY REPORTS
The Company does not make financial forecasts or projections nor endorse the
financial forecasts or projections of third parties nor does it comment on the
accuracy of third party reports. The Company does not participate in the
preparation of the reports or the estimates given by the analysts. Analysts who
issue financial reports are not privy to non-public financial information. Any
purchase of the Company's securities based on financial estimates provided by
analysts or third parties is done entirely at the risk of the purchaser.
12
<PAGE> 13
VISUAL EDGE SYSTEMS INC.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is not presently subject to any material
litigation.
ITEM 2. CHANGES IN SECURITIES
On March 26, 1997, Visual Edge Systems Inc. (the "Company")
consummated a bridge financing (the "Bridge Financing")
pursuant to which it issued to 13 investors (the "Bridge
Investors"), including Status-One Investments Inc., a company
controlled by Earl T. Takefman the Chief Executive Officer of
the Company, an aggregate of (i) 100,000 shares (the "Shares")
of common stock, par value $.01 per share (the "Common
Stock"), and (ii) 100,000 warrants (the "Warrants") to
purchase 100,000 share of Common Stock at a price of $10.00
per share, subject to adjustments in certain circumstances, at
any time before March 26, 2002.
As consideration for the Shares and Warrants, the investors in
the Bridge Financing pledged an aggregate of $3,500,000 in
cash and other marketable securities as cash collateral (the
"Cash Collateral") to Republic Bank of New York (Canada) Ltd.
("Republic") and Bank Hapoalim (Switzerland) Ltd. ("Bank
Hapoalim"). Republic and Bank Hapoalim have each issued a
stand-by letter of credit (the "Letters of Credit") in favor
of Barnett Bank, N.A. ("Barnett"), in the amount of $3,250,000
and $250,000, respectively. The letters of credit expire on
December 31, 1997.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
13
<PAGE> 14
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
<TABLE>
<S> <C>
(a) Exhibits
3.1 Certificate of Incorporation of the Company, as amended (Incorporated by reference to
Exhibit 3.1 to Amendment No. 2 to the Registrant's Registration Statement on Form
SB-2 (Registration No. 333-5193) effective July 24, 1996)
3.2 Amended and Restated By-Laws of the Company (Incorporated by reference to Exhibit 3.2
to Amendment No. 1 to the Registrant's Registration Statement on Form SB-2
(Registration No. 333-5193) effective July 24, 1996)
4.1 Form of Specimen Common Stock Certificate (Incorporated by reference to Exhibit 4.1
to Amendment No. 1 to the Registrant's Registration Statement on Form SB-2
(Registration No. 333-5193) effective July 24, 1996)
4.2 Form of Specimen Redeemable Warrant Certificate (Incorporated by reference to Exhibit
4.2 to Amendment No. 1 to the Registrant's Registration Statement on Form SB-2
(Registration No. 333-5193) effective July 24, 1996)
4.3 Form of Warrant Agreement between the Company and Whale Securities Co., L.P.
(Incorporated by reference to Exhibit 4.3 to the Registrant's Registration Statement
on Form SB-2 (Registration No. 333-5193) effective July 24, 1996)
4.4 Form of Warrant among American Stock Transfer & Trust Company, the Company and Whale
Securities Co., L.P. (Incorporated by reference to Exhibit 4.4 to the Registrant's
Registration Statement on Form SB-2 (Registration No. 333-5193) effective July 24,
1996)
4.5 Form of Warrant Certificate issued to investors in the Bridge Financing (Incorporated
by reference to Exhibit 4.5 to the Registrant's Registration Statement on Form SB-2
(Registration No. 333-23519) filed April 7, 1997)
10.1 License Agreement, dated March 1, 1995, between Great White Shark Enterprises, Inc.
and the Company, as supplemented (Incorporated by reference to Exhibit 10.1 to the
Registrant's Registration Statement on Form SB-2 (Registration No. 333-5193)
effective July 24, 1996)
10.2 Promissory Note, dated April 15, 1996, payable to the Republic National Bank of New
York (Incorporated by reference to Exhibit 10.2 to the Registrant's Registration
Statement on Form SB-2 (Registration No. 333-5193) effective July 24, 1996)
10.3 Employment Agreement, dated as of January 1, 1996, between Earl Takefman and the
Company (Incorporated by reference to Exhibit 10.3 to the Registrant's Registration
Statement on Form SB-2 (Registration No. 333-5193) effective July 24, 1996)
10.4 Employment Agreement, dated as of January 1, 1996, between Alan Lubell and the
Company (Incorporated by reference to Exhibit 10.4 to the Registrant's Registration
Statement on Form SB-2 (Registration No. 333-5193) effective July 24, 1996)
</TABLE>
14
<PAGE> 15
<TABLE>
<S> <C>
10.5 Employment Agreement, dated as of May 1, 1996, between Thomas S. Peters and the
Company (Incorporated by reference to Exhibit 10.5 to the Registrant's Registration
Statement on Form SB-2 (Registration No. 333-5193) effective July 24, 1996)
10.6 License Agreement, dated as of November 1, 1996, between the Company and Visual Edge
Systems (Australia) Pty. Ltd. (Incorporated by reference to Exhibit 10.6 to the
Registrant's Registration Statement on Form SB-2 (Registration No. 333-5193)
effective July 24, 1996)
10.7 Form of Consulting Agreement between the Company and Whale Securities Co., L.P.
(Incorporated by reference to Exhibit 10.7 to the Registrant's Registration Statement
on Form SB-2 (Registration No. 333-5193) effective July 24, 1996)
10.8 Amended and Restated 1996 Stock Option Plan (Incorporated by reference to
Exhibit 10.8 to the Registrant's Registration Statement on Form SB-2
(Registration No. 333-23519) filed April 7, 1997)
10.9 Employment Agreement, dated as of June 1, 1996, between the Company and Richard
Parker (Incorporated by reference to Exhibit 10.9 to Amendment No. 1 to the
Registrant's Registration Statement on Form SB-2 (Registration No. 333-5193)
effective July 24, 1996)
10.10 Assignment, dated April 19, 1996, from Thomas S. Peters to the Company (Incorporated
by reference to Exhibit 10.11 to the Registrant's Registration Statement on Form SB-2
(Registration No. 333-5193) effective July 24, 1996)
10.11 Share and Warrant Purchase Agreement, dated as of February 27, 1997, between the
Company and Status-One Investments Inc. (Incorporated by reference to Exhibit 10.11
to the Registrant's Registration Statement on Form SB-2 (Registration No. 333-23519)
filed April 7, 1997)
10.12 Form of Share and Warrant Purchase Agreement, dated as of February 27, 1997,
between the Company and each unaffiliated investor in the Bridge Financing
(Incorporated by reference to Exhibit 10.12 to the Registrant's Registration Statement
on Form SB-2 (Registration No. 333-23519) filed April 7, 1997)
11 Computation of Per Share Loss (Incorporated by reference to Exhibit 11 to the
Registrant's Registration Statement on Form SB-2 (Registration No. 333-23519)
filed April 7, 1997)
27 Financial Data Schedule (for SEC use Only).
(b) Reports on Form 8-K
None
</TABLE>
15
<PAGE> 16
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Visual Edge Systems Inc.
By: /s/ Earl T. Takefman
----------------------------------
Earl T. Takefman
May 14, 1997 Chief Executive Officer
/s/ Edward R. Smith
----------------------------------
Edward R. Smith
May 14, 1997 Chief Financial Officer
16
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<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
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<SECURITIES> 950,210
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