<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 8, 1998
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------------
VISUAL EDGE SYSTEMS INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 13-3778895
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
</TABLE>
--------------------------
2424 NORTH FEDERAL HIGHWAY, SUITE 100
BOCA RATON, FLORIDA 33431
(561) 750-7559
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
------------------------------
EARL T. TAKEFMAN
CHIEF EXECUTIVE OFFICER
VISUAL EDGE SYSTEMS INC.
2424 NORTH FEDERAL HIGHWAY, SUITE 100
BOCA RATON, FLORIDA 33431
(561) 750-7559
(Name, address, including zip code, and telephone
number, including area code, of agent for service of process)
------------------------------
COPIES TO:
DAVID W. POLLAK, ESQ.
MORGAN, LEWIS & BOCKIUS LLP
101 PARK AVENUE
NEW YORK, NEW YORK 10178
TEL: (212) 309-6000
FAX: (212) 309-6273
--------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended (the "Securities Act"), other than securities offered only in
connection with dividend or interest reinvestment plans, check the following
box. /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
TITLE OF EACH CLASS OF PROPOSED MAXIMUM PROPOSED MAXIMUM
SECURITIES AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
TO BE REGISTERED REGISTERED SECURITY(1) PRICE REGISTRATION FEE
<S> <C> <C> <C> <C>
Common Stock, par value $.01 per share (2)........ 7,450,000 $3.0625 $22,815,625 $6,731
Common Stock, par value $0.01 per share (3)....... 929,291 $3.0625 $2,845,954 $840
Common Stock, par value $0.01 per share(4)........ 270,000 $3.0625 $826,875 $244
Common Stock, par value $0.01 per share(5)........ 112,000 $3.0625 $343,000 $101
Total Registration Fee............................ $7,916
</TABLE>
(1) Estimated solely for the purpose of determining the registration fee, based
upon the average of the bid and asked prices of the Company's Common Stock
as quoted on the Nasdaq SmallCap Market on April 2, 1998, pursuant to Rule
457(c).
(2) Represents the maximum number of shares issuable by the Company to certain
Selling Stockholders in connection with the Marion Equity Financing (as
defined herein).
(3) Represents shares owned by, or issuable to, the Funds (as defined herein) in
connection with the June Financing, as amended (as defined herein).
(4) Represents shares issued to certain Selling Stockholders in consideration of
financial services rendered to the Company.
(5) Includes 102,000 issuable to Greg Norman in connection with the Greg Norman
License (as defined herein).
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
SUBJECT TO COMPLETION DATED APRIL 8, 1998
8,761,291 SHARES
VISUAL EDGE SYSTEMS INC.
COMMON STOCK
------------------
This Prospectus relates to the offer and sale from time to time by each of
the stockholders listed under "Selling Stockholders" (collectively, the "Selling
Stockholders") of an aggregate of 8,761,291 shares (the "Shares") of Common
Stock, $.01 par value per share (the "Common Stock"), of Visual Edge Systems
Inc. (the "Company"), which Shares consist of the following: (i) 7,450,000
shares of Common Stock sold or issuable to certain Selling Stockholders in
connection with the Marion Agreement (as defined herein); (ii) an aggregate of
929,291 shares of Common Stock owned by, or issuable to, the Funds (as defined
herein) in connection with the June Financing, as amended (as defined herein);
(iii) 102,000 shares issuable to Greg Norman in connection with the Greg Norman
License (as defined herein); (iv) 270,000 shares issued to a Selling Stockholder
as consideration for financial services provided to the Company; and (v) an
aggregate of 10,000 shares owned by certain Selling Stockholders. The Company
will not receive any of the proceeds from the sale of the Shares offered hereby.
The Common Stock of the Company is traded on the Nasdaq SmallCap Market
("Nasdaq") under the symbol "EDGE." On April 2, 1998, the last reported sale
price of the Common Stock as quoted on Nasdaq was $3.0625 per share.
------------------------
THE SHARES OFFERED HEREBY ARE SPECULATIVE AND INVOLVE A HIGH DEGREE OF RISK
AND SHOULD NOT BE PURCHASED BY INVESTORS WHO CANNOT AFFORD THE LOSS OF THEIR
ENTIRE INVESTMENT. SEE "RISK FACTORS" BEGINNING ON PAGE 6.
------------------------
The Shares may be sold from time to time in brokerage transactions at or
near prevailing market prices, or in privately negotiated transactions for the
account of each of the Selling Stockholders. Marion Interglobal, Ltd. and/or its
assigns ("Marion") has agreed to bear all expenses (other than discounts,
selling commissions and stock transfer taxes relating to the Shares owned by the
Selling Stockholders besides Marion) incurred in connection with the
registration and sale of the Shares being registered hereby. See "Selling
Stockholders" and "Plan of Distribution."
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
No person has been authorized to give any information or to make any
representations in connection with this offering other than those contained in
this Prospectus and, if given or made, such information and representations must
not be relied upon as having been authorized by the Company or the Selling
Stockholders. Neither the delivery of this Prospectus nor any sale made
hereunder shall, under any circumstances, create any implication that there has
been no change in the affairs of the Company since the date hereof or that the
information contained herein is correct as of any time subsequent to its date.
This Prospectus does not constitute an offer to sell or a solicitation of an
offer to buy any securities other than the Common Stock to which it relates.
This Prospectus does not constitute an offer to sell or a solicitation of an
offer to buy such securities in any circumstances in which such offer or
solicitation is unlawful.
THE DATE OF THIS PROSPECTUS IS APRIL , 1998.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files periodic reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information concerning the Company may be inspected without
charge at the principal office of the Commission, 450 Fifth Street, N.W.,
Washington, D.C. 20549, or at the Regional Offices of the Commission:
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60601; and 7 World Trade Center, 13th Floor, New York, New York 10007.
Copies of such material may be obtained by mail from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. The Commission maintains an Internet web site that contains
reports, proxy and information statements and other information regarding
issuers, including the Company, that file electronically with the Commission.
The address of such site is HTTP://WWW.SEC.GOV.
The Company has filed with the Commission a registration statement on Form
S-3 (together with all amendments and exhibits thereto, the "Registration
Statement") under the Securities Act of 1933, as amended (the "Securities Act"),
with respect to the shares of Common Stock offered hereby. This Prospectus does
not contain all of the information set forth in the Registration Statement,
certain parts of which are omitted in accordance with the rules and regulations
of the Commission. Statements made in this Prospectus as to the contents of any
contract, agreement or other document referred to are not necessarily complete
and are qualified in their entirety by reference to each such contract,
agreement or other document filed as an exhibit to the Registration Statement or
as previously filed with the Commission and incorporated therein by reference.
Copies of the Registration Statement and the exhibits thereto are on file at the
offices of the Commission and may be inspected and copied in the manner and at
the locations described above.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents, previously filed with the Commission by the
Company, are hereby incorporated by reference into this Prospectus:
1. The Company's Annual Report on Form 10-KSB for the fiscal year ended
December 31, 1997;
2. The Company's Current Reports on Form 8-K dated February 9, 1998 and
April 7, 1998; and
3. The description of the Common Stock set forth in the Company's
Registration Statement filed pursuant to Section 12 of the Exchange Act on
Form 8-A on July 11, 1996, and any amendment or report filed for the purpose
of updating any such description.
All reports and other documents subsequently filed by the Company after the
date of this Prospectus pursuant to Section 13(a), 13(c), 14 or 15(d) of the
Exchange Act and prior to the termination of this offering shall be deemed to be
incorporated by reference into this Prospectus and to be a part hereof from the
date of filing such documents or reports.
Any statement contained in a document incorporated or deemed to be
incorporated into this Prospectus by reference shall be deemed to be modified or
superseded for the purpose of this Prospectus to the extent that a statement
contained in this Prospectus, or in any other subsequently filed document which
also is or is deemed to be incorporated into this Prospectus by reference,
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
THIS PROSPECTUS INCORPORATES CERTAIN DOCUMENTS BY REFERENCE WHICH ARE NOT
PRESENTED HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS (OTHER THAN EXHIBITS TO
SUCH DOCUMENTS UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED HEREIN BY
REFERENCE) ARE AVAILABLE WITHOUT CHARGE UPON WRITTEN OR ORAL REQUEST DIRECTED TO
VISUAL EDGE SYSTEMS INC., 2424 NORTH FEDERAL HIGHWAY, SUITE 100, BOCA RATON,
FLORIDA 33431, ATTENTION: EARL TAKEFMAN (561) 750-7559.
2
<PAGE>
THE COMPANY
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 and is in the early stages of being an
operational company. The Company has developed 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
swing at several different club positions from two camera angles using 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."
BUSINESS OVERVIEW
INDUSTRY OVERVIEW
Golf has become an increasingly popular form of sport and entertainment in
recent years. According to the National Golf Foundation, consumer spending on
golf-related activities, including green fees, golf equipment and related
merchandise, increased from approximately $12.7 billion in 1989 to approximately
$15.1 billion in 1994. The number of golfers and golf courses and driving ranges
has also increased and golf industry participants have sought to increase public
awareness and provide greater access to golfers of all ages and income levels.
PRODUCTS
The Company has developed six full swing personalized ONE-ON-ONE golf
lessons with Greg Norman for both right- and left-handed golfers. The Company's
personalized products include a lesson stressing basic golf fundamentals for
either males or females, a lesson geared towards senior golfers, an advanced
lesson for lower-handicap players and a "follow-up" lesson which measures a
golfer's improvement from prior lessons. The Company also plans to develop
additional videotape golf lessons, such as short game, sand play and putting
lessons.
RELATIONSHIP WITH GREG NORMAN
Pursuant to a license agreement, as amended, by and among the Company, Greg
Norman and Great White Shark Enterprises, Inc. (the "Greg Norman License"), Greg
Norman agreed to grant to the Company a worldwide license to use his name,
likeness and endorsement and certain trademarks owned by him in connection with
the production and promotion of the Company's products. Pursuant to the Greg
Norman License, the Company will make minimum guaranteed royalty payments to Mr.
Norman from January 1998 through April 2000, which will consist of $2.38 million
in cash and 102,000 shares of Common Stock. The Company has paid Mr. Norman
$600,000 in cash through December 31, 1997. After the initial term, which ends
on June 30, 2000, the Company has the option to renew the Greg Norman License
for two additional five-year periods. The Company's business and prospects are
dependent upon the Company's continued association with Greg Norman.
The Greg Norman License prohibits Greg Norman from granting similar rights
to any person with respect to any concept which is the same as or confusingly
similar to the Company's concept or products. "Products" means a videotape or
CD-ROM or printed versions or other similar medium that is given or sold to a
customer upon use of the concept in which Greg Norman's golf swing or any other
golf professional's golf swing is compared to the user's golf swing using audio
and video analysis of both swings.
The Company may assign the Greg Norman License to an affiliated entity and
enter into distribution agreements with third parties with respect to product
sales.
3
<PAGE>
PATENTS, TRADEMARKS AND PROPRIETARY INFORMATION
The Company has filed a patent application with the United States Patent and
Trademark Office covering certain aspects of its digital video editing and
videotape production process. There can be no assurance, however, as to the
breadth or degree of protection which patents may afford the Company, that any
patent applications will result in issued patents or that patents will not be
circumvented or invalidated. Rapid technological developments in the computer
software industry result in extensive patent filings and a rapid rate of
issuance of new patents. In addition, there can be no assurance that the Company
will have financial or other resources necessary to enforce its own patent or
defend a patent infringement action and the Company could, under certain
circumstances, become liable for damages, which also could have a material
adverse effect on the Company. The Company relies on proprietary processes and
employs various methods to protect the concepts, ideas and documentation of its
products. However, such methods may not afford complete protection and there can
be no assurance that others will not independently develop such processes or
obtain access to the Company's proprietary processes, ideas and documentation.
Furthermore, although the Company has entered into confidentiality agreements
with certain of its employees, there can be no assurance that such arrangements
will adequately protect the Company.
RECENT FINANCING TRANSACTIONS
JUNE CONVERTIBLE FINANCING
On June 13, 1997, the Company arranged a three-year $7.5 million debt and
convertible equity facility (the "June Financing") with a group of investment
funds (the "Funds"). The Company issued and sold to the Funds the following
securities pursuant to the Securities Purchase Agreement, dated as of June 13,
1997 (the "Agreement"), among the Company and the Funds: (i) 8.25% unsecured
convertible notes (the "Notes") in the aggregate principal amount of $7,500,000
with a maturity date of three years from the date of issuance, subject to the
mandatory automatic exchange of $5 million of the Notes for Preferred Stock, par
value $.01 per share, which Notes are convertible into shares of Common Stock
(the "Note Conversion Shares") at any time and from time to time commencing
January 1, 1998 at the option of the holder thereof subject to certain
limitations on conversion set forth in the Agreement; (ii) 93,677 shares of
Common Stock subject to adjustment (the "Grant Shares"); and (iii) five-year
warrants (the "June Warrants") to purchase 100,000 shares of Common Stock (the
"Warrant Shares") at an exercise price equal to $10.675. The June Warrants are
redeemable commencing October 1, 1998 at a redemption price equal to $.10 per
share, subject to adjustment based on a 20-day minimum closing bid price of the
Common Stock. The net proceeds to the Company from the sale of the Notes, Grant
Shares and June Warrants was $7,236,938. In addition, the Company issued 14,052
shares (the "IPO Underwriters Shares") of Common Stock to the underwriter in the
Company's initial public offering as a fee for services rendered in connection
with the transactions contemplated by the Agreement.
Pursuant to the Agreement, the Company was required to issue additional
Grant Shares (the "Additional Grant Shares") to the Funds in the event that the
closing bid price of Common Stock for each trading day during any consecutive 10
trading days from June 13, 1997 through December 31, 1997 did not equal at least
$10.00 per share. The closing bid price did not meet this level and as a result,
the Company issued 180,296 Additional Grant Shares during the fourth quarter of
1997.
Interest payments on the Notes are, at the option of the Company, payable in
cash or in shares of Common Stock. During 1997 the Company issued, for payment
of interest due, an aggregate of 22,962 shares (the "September Interest Shares")
for the period ended September 30, 1997 and an aggregate of 43,209 shares (the
"December Interest Shares") for the period ended December 31, 1997. In addition,
on March 31, 1998, 47,147 additional shares (the "March Interest Shares") became
issuable as interest for the quarter then ended.
4
<PAGE>
On February 6, 1998, the Company entered into the First Amendment to the
Securities Purchase Agreement and Related Documents, dated as of December 31,
1997 (the "First Amendment"), among the Company and the Funds. Pursuant to the
First Amendment, the Funds converted $6 million aggregate principal amount of
the Notes into 6,000 shares of the Company's Series A Convertible Preferred
Stock (the "Preferred Stock") with a redemption or liquidation value of $1,000
per share. The Preferred Stock is senior to the Common Stock with respect to
dividends, liquidation and dissolution. Each share of Preferred Stock entitles
the holder to an annual dividend of 8.25% ($82.50 per share), payable on a
quarterly basis, which dividend increases to 18% in certain situations as
specified in the Amended Certificate of Designation with respect to the
Preferred Stock. In addition, the "Maximum Conversion Price" (as defined in the
First Amendment) at which shares of Preferred Stock are convertible into Common
Stock (the "Stock Conversion Shares") is $6.00, subject to adjustment in certain
circumstances; in certain instances, such conversion price may be as low as 50%
of the market price of the Common Stock.
The remaining $1.5 million of outstanding Notes held by the Funds have
become secured debt pursuant to a Security Agreement, dated as of February 6,
1998 (the "Security Agreement"), between the Company and H.W. Partners, L.P., as
agent for and representative of the Funds. With respect to such $1.5 million in
outstanding Notes, the Funds have been granted a security interest in the
collateral described in the Security Agreement, which includes all of the
Company's unrestricted cash deposit accounts, accounts receivable, inventory and
equipment and fixtures excluding the vans.
The Company has issued to the Funds an aggregate of 200,000 warrants (the
"New Warrants"), each to purchase one share of Common Stock (collectively, the
"New Warrant Shares") at an exercise price equal to $4.00 per share. The New
Warrants are exercisable through December 2002 and are redeemable at the option
of the Company, commencing January 1, 2000, based on a 20-day minimum closing
bid price of Common Stock, at a redemption price equal to $.10 per share. The
New Warrants also contain a "cashless exercise" feature.
On March 16, 1998, the Company sold an additional 1,550 shares of Preferred
Stock to the Funds in exchange for non-marketable securities with an aggregate
fair value of $1,550,000. In connection therewith, the Funds as the holders of
the majority of the outstanding Preferred Stock obtained the right to appoint
one director to the Company's Board of Directors, though they had not named such
director as of April 8, 1998.
As a condition to the consummation of the transactions contemplated by the
Marion Agreement (as defined herein), the Company entered into the Agreement and
Second Amendment to Bridge Securities Purchase Agreement and Related Documents
(the "Second Amendment"), among the Company and the Funds. Pursuant to the
Second Amendment, the Funds agreed that they would not convert, prior to
December 31, 1998, any shares of Preferred Stock or any principal amount of the
Notes into shares of Common Stock, unless a "Material Transaction" (defined as a
change of control of the Company, a transfer of all or substantially all of the
Company's assets or a merger of the Company into another entity) has occurred.
Further, the Funds agreed that they would not, prior to March 31, 1999, publicly
sell any shares of Common Stock owned or acquired by the Funds, unless a
Material Transaction has occurred; the Funds are permitted, after June 30, 1998
and subject to the Company's right of first refusal, to privately sell any
shares of Common Stock that they own or acquire, provided the purchaser agrees
in writing to be bound by the same resale restrictions.
The Funds have granted to the Company an option to redeem the Preferred
Stock and the Notes owned by the Funds as follows: (i) up to $2,500,000 may be
redeemed on or before April 30, 1998; (ii) an additional $2,500,000 may be
redeemed on or before May 31, 1998; and (iii) an additional $2,500,000 may be
redeemed from and after June 1, 1998. If the date that the Company redeems such
Preferred Stock and Notes is on or before June 30, 1998, the redemption price
will be 80% of the principal amount outstanding of the Notes being redeemed or
80% of the liquidation preference of the Preferred Stock being redeemed, plus
accrued interest and dividends in the event that all of the Preferred Stock and
Notes owned by the
5
<PAGE>
Funds are not redeemed by June 30, 1998. If the redemption of the Notes and
Preferred Stock is after June 30, 1998 but on or before December 31, 1998, the
80% referred to in the preceding sentence shall increase by 2% per month, up to
90% in December 1998. If the redemption of the Notes and Preferred Stock occurs
after December 31, 1998, the redemption price shall be as provided in the
original agreement between the Company and the Funds. The Company is required to
redeem all of the Preferred Stock outstanding prior to redemption of any of the
Notes. In addition, the Funds have granted to the Company and to Marion (as
hereafter defined) an option to acquire, on or before March 31, 1999, all of the
shares of Common Stock owned by the Funds.
In connection with the Second Amendment, the Funds received 100,000 shares
of Common Stock, as well as the right to receive 200,000 additional shares of
Common Stock (collectively, the "New Shares") in the event that all of the
Preferred Stock and Notes owned by the Funds have not been redeemed by the
Company by June 30, 1998. Further, the exercise price of the June Warrants has
been reduced from $10.675 per share to $3.25 per share and the exercise price of
the New Warrants has been reduced from $4.00 per share to $3.25 per share. The
Company has agreed to register all of such shares of Common Stock (including the
shares underlying warrants) under the Securities Act.
MARION EQUITY FINANCING
In March 1998, the Company entered into a Purchase Agreement (the "Marion
Agreement") with Marion Interglobal, Ltd., an investment group ("Marion"). The
Marion Agreement calls for the Company to receive up to $11,000,000 from Marion
in exchange for shares of Common Stock as explained herein. Pursuant to the
Marion Agreement, the purchase of Common Stock is to occur in three tranches as
follows: (i) on March 27, 1998 the Company sold to Marion 1,200,000 shares of
Common Stock for an aggregate consideration of $3,000,000; $1,500,000 of the
$3,000,000 has been funded, with the remaining $1,500,000 to be funded on the
business day after this registration statement has been declared effective by
the Securities and Exchange Commission; (ii) sixty days following the
registration of all the underlying shares of Common Stock under the Marion
Agreement, the Company will sell to Marion 800,000 shares of Common Stock for an
aggregate consideration of $2,000,000; and (iii) on or prior to September 30,
1998 the Company shall sell a number of shares of Common Stock (to be determined
by when the closing occurs, which would range from 2,666,667 shares to 3,200,000
shares) for an aggregate consideration of $6,000,000. The third tranche is
contingent on Marion's satisfaction that the Company has met or exceeded the
financial targets expected by Marion, in its sole discretion. The Company has
agreed to use the $6,000,000 in proceeds from the third tranche to redeem the
Notes and Preferred Stock issued in the June Financing. The issuance and sale of
1,400,000 shares of Common Stock in the first tranche and all of the shares to
be issued in the second tranche to Marion, is subject to approval by the
Company's stockholders. The Company will pay transaction fees to Marion upon
completion of each tranche as follows: (i) 1,200,000 shares of Common Stock for
the first $3,000,000 tranche; (ii) 800,000 shares of Common Stock for the second
$2,000,000 tranche; and (iii) no additional fee for the completion of the third
tranche.
Further, upon the consummation of the second tranche of the Marion
Agreement, Mr. Alan Lubell, Chairman of the Board of the Company, has agreed to
transfer to Marion 250,000 shares of Common Stock, which shares are required to
be registered under the Securities Act.
In addition, if the third tranche of the aforementioned financing is
completed, then until March 30, 2001, the Company is required to obtain the
prior written consent of Marion before the consummation of any additional
financing transaction except for any credit facilities or lines of credit with
lenders or equipment financing arrangements. Further, the Company may not redeem
the warrants issued in its initial public offering (the "IPO Warrants") without
the prior written consent of Marion.
6
<PAGE>
RISK FACTORS
Readers of this Registration Statement should carefully consider the
following risk factors, in addition to the other information contained herein.
This Registration Statement contains certain statements of a forward looking
nature relating to future events or the future financial performance of the
Company within the meaning of Section 27A of the Securities Act, and Section 21E
of the Securities Exchange Act of 1934, as amended, and which are intended to be
covered by the safe harbors created thereby. Readers are cautioned that such
statements are only predictions and that actual events or results may differ
materially. In evaluating such statements, readers should specifically consider
the various factors identified herein, including the matters set forth below,
which could cause actual results to differ materially from those indicated by
such forward looking statements.
SIGNIFICANT AND CONTINUING LOSSES. For the period from July 15, 1994
(inception) to December 31, 1997, the Company incurred a cumulative net loss of
$13,618,223. The Company believes that it will incur continuing losses until, at
the earliest, the Company generates sufficient revenues to offset the
substantial upfront capital expenditures and operating costs associated with
commercializing its products.
NEED FOR ADDITIONAL FINANCING. The Company recently entered into the Marion
Agreement. The continued implementation of the Company's business plan will
require capital resources that will be available to the Company only upon the
completion of the first and second tranches of the aforementioned financing.
There can be no assurance that the conditions necessary for the completion of
these tranches will occur. In addition, if the third tranche of the
aforementioned financing is completed, then until March 30, 2001, the Company is
required to obtain the prior written consent of Marion before the consummation
of any additional financing transaction except for any credit facilities or
lines of credit with lenders or equipment financing arrangements. There can be
no assurance that Marion will consent to any additional financings.
UNCERTAINTY OF PROPOSED PLAN OF OPERATION. The Company's plan of operation
and prospects are largely dependent upon the Company's ability to successfully
hire and retain skilled technical, marketing and other personnel, establish and
maintain satisfactory relationships with those who arrange golf events,
successfully develop, equip and operate ONE-ON-ONE vans on a timely and cost
effective basis and achieve significant market acceptance for its products.
There can be no assurance that the Company will be able to continue to implement
its business plan or that unanticipated expenses, problems or technical
difficulties will not occur which would result in material delays in its
implementation.
POTENTIAL INFLUENCE ON MARKET OF SALE OF THE FUNDS' SHARES AND MARION'S
SHARES; DILUTION. As part of the June Financing, the Company issued to the
Funds, through December 31, 1997, an aggregate of 65,671 September Interest and
December Interest Shares, 93,677 Grant Shares and 180,296 Additional Grant
Shares. In addition, the Company will be obligated to issue to the Funds the
Note Conversion Shares and the Stock Conversion Shares in the event that the
Funds decide to convert their Notes or shares of Preferred Stock into Common
Stock. As of December 31, 1997, the Funds converted $6.0 million aggregate
principal amount of the Notes into 6,000 shares of Preferred Stock. The
remaining $1.5 million in Notes outstanding, as well as the 6,000 outstanding
shares of Preferred Stock, are convertible into Common Stock at an average
discount of 20% to the market price of the Common Stock at the time of
conversion; in certain circumstances, the conversion price may be as low as 50%
of the market price of the Common Stock at the time of conversion. Conversion of
some or all of the $7.5 million of Notes and Preferred Stock would have a
dilutive effect on the Company's stockholders. In addition, in connection with
the Marion Agreement the Company is to issue 2,400,000 shares of Common Stock in
the first tranche (of which half of such shares have been issued) and may be
obligated to issue an additional 4,800,000 shares of Common Stock to Marion,
which shares will be registered under the Securities Act, at which time such
shares will be freely tradable without restriction. While no prediction can be
made as to the effect that the sale of any of the aforementioned shares will
have on market prices of the Common Stock prevailing from time to time, the
possibility that a substantial number of shares of Common Stock may be sold in
the
7
<PAGE>
public market may adversely affect prevailing market prices and could impair the
Company's ability to further raise capital through the sale of its equity
securities.
POTENTIAL INFLUENCE ON MARKET OF WARRANT REDEMPTION. Each of the 1,495,000
IPO Warrants entitles the registered holder thereof to purchase one share of
Common Stock, at a price of $5.00, subject to adjustment in certain
circumstances, at any time until July 24, 2000. The IPO Warrants are redeemable
by the Company, upon the consent of the underwriter in the Company's IPO, at a
price of $.10 per Warrant, and subject to the terms set forth therein. In the
event that the Company calls the IPO Warrants for redemption, it will be
economically advantageous for the warrant holders to exercise the IPO Warrants,
resulting in the issuance by the Company of up to 1,495,000 additional shares of
Common Stock. While no prediction can be made as to the effect, if any, that the
availability for sale or actual sale of such shares of Common Stock will have on
market prices prevailing from time to time, the possibility that a substantial
number of shares of Common Stock may be sold in the public market may adversely
affect prevailing market prices for the Common Stock and could impair the
Company's ability to further raise capital through the sale of its equity
securities. Further, the exercise of the IPO Warrants and issuance of shares of
Common Stock at a price of $5.00 (an amount that is likely to be below the
prevailing market price of the Common Stock since a precondition for the
redeemability of the IPO Warrants is that the price of the Common Stock is at
least $7.50, subject to certain terms and adjustments) may have an adverse
effect on the market price of the Common Stock. In addition, the Company may not
redeem the IPO Warrants without the prior written consent of Marion. There can
be no assurance that Marion will consent to such redemption.
OUTSTANDING OPTIONS AND WARRANTS. There are currently outstanding options
to purchase an aggregate of 948,419 shares of Common Stock at exercise prices
ranging from $5.00 to $10.75 per share, and outstanding warrants (including the
IPO warrants) to purchase an aggregate of 2,230,000 shares of Common Stock at
exercise prices ranging from $3.25 to $10.00. Exercise of any of the foregoing
options or warrants will have a dilutive effect on the Company's stockholders.
Furthermore, the terms upon which the Company may be able to obtain additional
equity financing may be adversely affected, since the holders of the options or
warrants can be expected to exercise them, if at all, at a time when the Company
would, in all likelihood, be able to obtain any needed capital on terms more
favorable to the Company than those provided in the options or warrants.
DEPENDENCE ON GREG NORMAN LICENSE. Pursuant to the Greg Norman License,
Greg Norman agreed to grant to the Company a worldwide license to use his name,
likeness, endorsement and certain trademarks in connection with the production
and promotion of the Company's products. The Company will make guaranteed
minimum royalty payments to Mr. Norman from January 1998 through April 2000,
which will consist of $2.38 million in cash and 102,000 shares of Common Stock.
Pursuant to the Greg Norman License, the Company has paid Mr. Norman $600,000
through December 31, 1997. Failure to make any required payment under the Greg
Norman License would result in termination of the license agreement, which would
have a material adverse effect on the Company. Greg Norman's death, disability
or retirement from tournament play or any significant decline in the level of
his tournament play may, under certain circumstances, have a material adverse
effect on the Company. In addition, the commission by Greg Norman of any serious
crime or any act which adversely affects his reputation could also have an
adverse affect on the Company. The Company has obtained "key-man" insurance on
the life of Greg Norman in the amount of $10,000,000.
UNCERTAINTY OF MARKET ACCEPTANCE AND COMMERCIALIZATION STRATEGY. The
Company's ONE-ON-ONE personalized videotape golf lesson is a new business
concept and, accordingly, demand and market acceptance for the Company's
products is subject to a high level of uncertainty. Achieving market acceptance
for the Company's products will require significant efforts and expenditures by
the Company to create awareness and demand. The Company's prospects will be
significantly affected by its ability to successfully build an effective sales
organization and develop a significant number of ONE-ON-ONE vans. The Company
only
8
<PAGE>
commenced marketing activities in 1997 and has limited marketing and technical
experience and limited financial, personnel and other resources to independently
undertake extensive marketing activities. The Company's strategy and preliminary
and future marketing plans may be subject to change as a result of a number of
factors, including progress or delays in the Company's marketing efforts,
changes in market conditions (including the emergence of potentially significant
related market segments), the nature of possible license and distribution
arrangements which may become available to it in the future and competitive
factors. To the extent that the Company enters into thirdparty marketing and
distribution arrangements in the future, it will be dependent on the marketing
efforts of such third parties and in certain instances on the popularity and
sales of their products. Additionally, to the extent that the Company seeks to
market its products in foreign markets, the Company may be subject to various
risks associated with foreign trade, including customs duties, quotas and other
trade restrictions, shipping delays, currency fluctuations and international
political and economic developments. There can be no assurance that the
Company's strategy will result in successful product commercialization or that
the Company's efforts will result in initial or continued market acceptance for
the Company's products.
POTENTIAL PRODUCT OBSOLESCENCE. The markets for the Company's products may
be characterized by rapidly changing technology which could result in product
obsolescence or short product life cycles. Accordingly, the ability of the
Company to compete may be dependent upon the Company's ability to continually
enhance and improve its software. There can be no assurance that competitors
will not develop technologies or products that render the Company's products
obsolete or less marketable.
DEPENDENCE ON KEY PERSONNEL; NEED FOR QUALIFIED PERSONNEL. The prospects of
the Company are dependent on the personal efforts of Earl T. Takefman, its Chief
Executive Officer, and other key personnel. The loss of the services of Mr.
Takefman could have a material adverse effect on the Company's proposed business
and prospects. The Company has entered into employment agreements with Mr.
Takefman and other key personnel and has obtained "key-man" insurance on the
life of Mr. Takefman in the amount of $5,000,000. The success of the Company is
also dependent upon its ability to hire and retain additional qualified
marketing, technical, financial and other personnel. Competition for qualified
personnel is intense and there can be no assurance that the Company will be able
to hire or retain additional qualified personnel. Any inability to attract and
retain qualified personnel would have a material adverse effect on the Company.
DEPENDENCE ON LIMITED PRODUCT LINE. The Company is entirely dependent on
the sales of a limited product line to generate revenues and on the commercial
success of its products. There can be no assurance that the Company's products
will prove to be commercially viable. Failure to achieve commercial viability
would have a material adverse effect on the Company.
INDUSTRY FACTORS. The Company's future operating results will depend on
numerous factors beyond its control, including the popularity, price and timing
of competitors' products being introduced and distributed, national, regional
and local economic conditions (particularly recessionary conditions adversely
affecting consumer spending), changes in consumer demographics, the availability
and relative popularity of other forms of sports and entertainment, and public
tastes and preferences, which may change rapidly and cannot be predicted. The
Company's ability to plan for product development and promotional activities may
be affected by the Company's ability to anticipate and respond to relatively
rapid changes in consumer tastes and preferences. To the extent that the Company
targets consumers with limited disposable income, the Company may find it more
difficult to price its products at levels which result in profitable operations.
In addition, seasonal weather conditions limiting the playing seasons in certain
geographic areas may result in fluctuations in the Company's future operating
results.
DEPENDENCE ON THIRD PARTY PRODUCTION COMPANIES AND EQUIPMENT
MANUFACTURERS. The Company relies on third party manufacturers for all of its
supply of video and computer equipment and vans used in its operations. The
Company has not entered into agreements with any equipment manufacturer and
intends to purchase or lease equipment components pursuant to purchase orders
placed from time to time
9
<PAGE>
in the ordinary course of business. While the Company is not dependent on any
single supplier to continue its operations, the failure or delay by any
manufacturer in supplying components to the Company on favorable terms could
result in interruptions in its operations and adversely affect the Company's
ability to implement its business plan.
NO DIVIDENDS. To date, the Company has not paid any cash dividends on its
Common Stock and does not expect to declare or pay dividends on the Common Stock
in the foreseeable future. In addition, the payment of cash dividends is limited
by the terms of the Preferred Stock and may be further limited or prohibited by
the terms of future loan agreements, if any, or the future issuance of other
series of Preferred Stock, if any.
AUTHORIZATION AND DISCRETIONARY ISSUANCE OF PREFERRED STOCK. The Company's
Certificate of Incorporation authorizes the Company's Board of Directors to
issue up to 5,000,000 shares of Preferred Stock, from time to time, in one or
more series. On February 6, 1998, $6 million principal amount of outstanding
Notes was converted into 6,000 shares of Preferred Stock and on March 16, 1998,
an additional 1,550 shares of Preferred Stock was purchased by the Funds in
exchange for non-marketable securities with an aggregate fair value of
$1,550,000. The Preferred Stock has a liquidation or redemption preference of
$1,000 per share and is senior to the Common Stock with respect to dividends,
liquidation and dissolution. Each share of Preferred Stock entitles the holder
to an annual dividend of 8.25% ($82.50 per share), payable on a quarterly basis,
which dividend increases to 18% in certain situations as specified in the
Amended Certificate of Designation with respect to the Preferred Stock. Holders
of the shares of Preferred Stock do not have voting rights, except upon the
occurrence of certain events that would affect the preferences and rights of the
Preferred Stock. Each share of Preferred Stock is convertible into Common Stock
at the lesser of: (i) $6.00 per share of Common Stock or (ii) a discount ranging
from 15% to 22.5% of the market price of the Common Stock at the time of
conversion; in certain circumstances, the conversion price may be as low as 50%
of the market price of the Common Stock at the time of conversion. The Preferred
Stock is redeemable by the Company at any time at its option. In addition, the
holder of a majority of the outstanding Preferred Stock have the right to
appoint one director to the Company's Board of Directors, though they had not
named such director at April 8, 1998.
The Board of Directors is authorized, without further approval of the
stockholders, to fix the dividend rights and terms, conversion rights, voting
rights, redemption rights and terms, liquidation preferences, and any other
rights, preferences, privileges and restrictions applicable to each new series
of Preferred Stock.
VOLATILITY OF MARKET PRICE OF COMMON STOCK AND WARRANTS. Since the IPO, the
market prices of the Company's publicly traded securities have been highly
volatile as has been the case with the securities of other emerging companies.
Factors such as the Company's operating results and announcements by the Company
or its competitors may have a significant impact on the market price of the
Company's securities. In addition, in recent years, the stock market has
experienced a high level of price and volume volatility and market prices for
the stock of many companies have experienced wide price fluctuations which have
not necessarily been related to the operating performance of such companies.
POTENTIAL INFLUENCE ON THE MARKET OF THE IPO UNDERWRITER. The underwriter
in the Compay's IPO makes a market in the Common Stock and the IPO Warrants and
may otherwise effect transactions in the Common Stock and the IPO Warrants. Such
activities may exert a dominating influence on the market and such activity may
be discontinued at any time. The prices and liquidity of the Company's
securities may be significantly affected by the underwriter in the Company's
IPO.
LIMITATIONS OF LIABILITY OF DIRECTORS AND OFFICERS. The Company's
Certificate of Incorporation includes provisions to limit, to the full extent
permitted by Delaware law, the personal liability of directors of the Company
for monetary damages arising from a breach of their fiduciary duties as
directors. The Certificate of Incorporation also includes provisions to the
effect that (subject to certain exceptions) the Company shall, to the maximum
extent permitted from time to time under the law of the State of
10
<PAGE>
Delaware, indemnify, and upon request shall advance expenses to, any director or
officer to the extent permitted under such law as it may from time to time be in
effect. In addition, the Company's By-Laws require the Company to indemnify, to
the full extent permitted by law, any director, officer, employee or agent of
the Company for acts which such person reasonably believes are not in violation
of the Company's corporate purposes as set forth in the Certificate of
Incorporation. As a result of such provisions in the Certificate of
Incorporation and the By-Laws of the Company, stockholders may be unable to
recover damages against the directors and officers of the Company for actions
taken by them which constitute negligence, gross negligence or a violation of
their fiduciary duties, which may reduce the likelihood of stockholders
instituting derivative litigation against directors and officers and may
discourage or deter stockholders from suing directors, officers, employees and
agents of the Company for breaches of their duty of care, even though such an
action, if successful, might otherwise benefit the Company and its stockholders.
USE OF PROCEEDS
The Shares of Common Stock being offered hereby are for the account of the
Selling Stockholders. Accordingly, the Company will not receive any of the
proceeds from the sale of the Shares by the Selling Stockholders. See "Selling
Stockholders."
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<PAGE>
SELLING STOCKHOLDERS
An aggregate of 8,761,291 shares of Common Stock may be offered and sold
pursuant to this Prospectus consisting of the following: (i) 7,450,000 shares of
Common Stock sold and/or issuable to certain Selling Stockholders in connection
with the Marion Equity Financing; (ii) an aggregate of 929,291 shares of Common
Stock owned by, or issuable to, the Funds in connection with the June Financing;
(iii) 102,000 shares issuable to Greg Norman in connection with the Greg Norman
License; (iv) 270,000 shares issued to a Selling Stockholder as consideration
for financial services provided to the Company; and (v) an aggregate of 10,000
shares owned by certain Selling Stockholders. The Company will not receive any
of the proceeds from the sale of the Shares offered hereby. Except as indicated,
none of the Selling Stockholders has ever held any position or office with the
Company or has had any other material relationship with the Company. The
following table sets forth certain information with respect to the Selling
Stockholders:
<TABLE>
<CAPTION>
PERCENTAGE PERCENTAGE
BENEFICIAL BENEFICIAL BENEFICIAL BENEFICIAL
OWNERSHIP OF OWNERSHIP OF AMOUNT OF OWNERSHIP OF OWNERSHIP OF
COMMON STOCK COMMON STOCK COMMON STOCK COMMON STOCK COMMON STOCK
SELLING STOCKHOLDERS PRIOR TO SALE BEFORE OFFERING OFFERED AFTER OFFERING AFTER OFFERING
- ------------------------- -------------- ----------------- -------------- ----------------- -----------------
<S> <C> <C> <C> <C> <C>
Marion Interglobal,
Ltd.................... 7,450,000(1) 12.8%(2) 7,450,000 (3) (3)
Infinity Investors
Limited................ 552,011(4)(5) 5.4 412,079(5) (3) (3)
Infinity Emerging
Opportunities
Limited................ 122,140(4)(6) 1.2 91,572(6) (3) (3)
Summit Capital Limited... 127,571(4)(7) 1.3 113,394(7) (3) (3)
Glacier Capital
Limited................ 127,569(4)(8) 1.3 113,393(8) (3) (3)
Investor Relations
Services............... 270,000 3.5 270,000 (3) (3)
Greg Norman.............. 427,000(9) 5.5 102,000 (3) (3)
Frank Williams(10)....... 78,315 1.0 5,000 (3) (3)
John New................. 5,000 * 5,000 (3) (3)
</TABLE>
- ------------------------
* Less than 1%
(1) Includes shares of Common Stock issued to date to Marion in the first
tranche, as well as the maximum number of shares of Common Stock issuable
upon the consummation of the second half of the first tranche, as well as
the second and third tranches. Also includes 250,000 shares of Common Stock
to be transferred from Alan Lubell, the Chairman of the Board of the
Company, to Marion upon the consummation of the second tranche. See "The
Company--Marion Equity Financing."
(2) Percentage calculated includes only the 1,000,000 shares of Common Stock
issued to date to Marion.
(3) Because this Selling Stockholder may sell all, some or none of the Shares
included herein, and because the offering contemplated by this Prospectus is
not now a "firm commitment" underwritten offering, no estimate may be given
as to the number of Shares that will be held by such Selling Stockholder
upon or prior to the termination of this offering. See "Plan of
Distribution."
(4) Excludes all Note Conversion Shares and Stock Conversion Shares. See "The
Company--June Convertible Financing."
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<PAGE>
(5) Includes an aggregate of 44,387 Additional Grant Shares, 13,477 September
Interest Shares, 25,926 December Interest Shares, 28,289 March Interest
Shares, 120,000 New Warrant Shares, 60,000 New Shares issued to date and
120,000 New Shares issuable on June 30, 1998 in certain circumstances. See
"The Company--June Financing."
(6) Includes an aggregate of 9,862 Additional Grant Shares, 2,995 September
Interest Shares, 5,761 December Interest Shares, 6,286 March Interest
Shares, 26,667 New Warrant Shares, 13,334 New Shares issued to date and
26,667 New Shares issuable on June 30, 1998 in certain circumstances. See
"The Company--June Financing."
(7) Includes an aggregate of 12,490 Grant Shares, 9,862 Additional Grant Shares,
2,995 September Interest Shares, 5,761 December Interest Shares, 6,286 March
Interest Shares, 26,667 New Warrant Shares, 13,333 New Shares issued to
date, 26,667 New Shares issuable on June 30, 1998 in certain circumstances
and 9,333 June Warrant Shares. See "The Company--June Financing." Such Grant
Shares and June Warrant Shares have been transferred to this Selling
Stockholder from Sandera Partners, L.P., an affiliated entity.
(8) Includes an aggregate of 12,490 Grant Shares, 9,862 Additional Grant Shares,
2,995 September Interest Shares, 5,761 December Interest Shares, 6,286 March
Interest Shares, 26,667 New Warrant Shares, 13,333 New Shares issued to
date, 26,666 New Shares issuable on June 30, 1998 in certain circumstances
and 9,333 June Warrant Shares. See "The Company--June Financing." Such Grant
Shares and June Warrant Shares have been transferred to this Selling
Stockholder from Lion Capital Partners, L.P., an affiliated entity.
(9) Includes 102,000 shares issuable under the Greg Norman License and 25,000
shares issuable upon exercise of immediately exercisable options.
(10) Includes 14,997 shares issuable upon exercise of immediately exercisable
options. Mr. Williams was formerly a director of the Company.
The Company has agreed to register the public offering of all of the Shares
under the Securities Act. Pursuant to a Registration Rights Agreement, dated as
of March 27, 1998, between the Company and Marion, Marion has agreed to pay all
expenses incurred in connection with the registration of the Shares, including
all registration, listing and qualification fees, printers and acounting fees
and the fees and disbursements of the Company's counsel. Marion will not pay
underwriting discounts or commissions, stock transfer taxes, if any, or fees and
expenses of counsel to the extent that such expenses are incurred by other
Selling Stockholders.
The Selling Stockholders identified above may have sold, transferred or
otherwise disposed of all or a portion of their Shares since the date on which
they provided the information regarding their Common Stock in transactions
exempt from the registration requirements of the Securities Act. Additional
information concerning the above listed Selling Stockholders may be set forth
from time to time in prospectus supplements to this Prospectus. See "Plan of
Distribution."
Pursuant to the terms of a Registration Rights Agreement, dated as of June
13, 1997, among the Company and the Funds, as amended, the Company has agreed to
file the Registration Statement to which this Prospectus forms a part for the
purpose of registering the potential resale of the Funds' shares set forth
above. In addition, the Company and the Funds have agreed to indemnify each
other and certain affiliated parties from and against any losses or claims
arising out of, among other things, (1) any alleged untrue statement of a
material fact or (2) any material omission contained or referred to in the
Registration Statement. Insofar as indemnification for liabilities arising under
the Securities Act may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other
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<PAGE>
than the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the Registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question of whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
PLAN OF DISTRIBUTION
Sales of the Shares may be made from time to time by the Selling
Stockholders, or, subject to applicable law, by pledgees, donees, distributees,
transferees or other successors in interest. Such sales may be made on Nasdaq,
in another over-the-counter market, on a national securities exchange (any of
which may involve crosses and block transactions), in privately negotiated
transactions or otherwise or in a combination of such transactions at prices and
at terms then prevailing or at prices related to the then current market price,
or at privately negotiated prices. In addition, any Shares covered by this
Prospectus which qualify for sale pursuant to Section 4(1) of the Securities Act
or Rule 144 promulgated thereunder may be sold under such provisions rather than
pursuant to this Prospectus. Without limiting the generality of the foregoing,
the Shares may be sold in one or more of the following types of transactions:
(a) a block trade in which the broker-dealer so engaged will attempt to sell the
Shares as agent but may position and resell a portion of the block as principal
to facilitate the transaction; (b) purchases by a broker or dealer as principal
and resale by such broker or dealer for its account pursuant to this Prospectus;
(c) an exchange distribution in accordance with the rules of such exchange; (d)
ordinary brokerage transactions and transactions in which the broker solicits
purchasers; and (e) face-to-face transactions between sellers and purchasers
without a broker-dealer. In effecting sales, brokers or dealers engaged by the
Selling Stockholders may arrange for other brokers or dealers to participate in
the resales.
In connection with distributions of the Shares or otherwise, the Selling
Stockholders may enter into hedging transactions with broker-dealers. In
connection with such transactions, broker-dealers may engage in short sales of
the Shares registered hereunder in the course of hedging the positions they
assume with Selling Stockholders. The Selling Stockholders may also sell Shares
short and deliver the Shares to close out such short positions. The Selling
Stockholders may also enter into option or other transactions with
broker-dealers which require the delivery to the broker-dealer of the Shares
registered hereunder, which the broker-dealer may resell pursuant to this
Prospectus. The Selling Stockholders may also pledge the Shares registered
hereunder to a broker or dealer and upon a default, the broker or dealer may
effect sales of the pledged Shares pursuant to this Prospectus.
Brokers, dealers or agents may receive compensation in the form of
commissions, discounts or concessions from Selling Stockholders in amounts to be
negotiated in connection with the sale. Such brokers or dealers and any other
participating brokers or dealers may be deemed to be "underwriters" within the
meaning of the Securities Act in connection with such sales and any such
commission, discount or concession may be deemed to be underwriting discounts or
commissions under the Securities Act.
Information as to whether underwriters who may be selected by the Selling
Stockholders, or any other broker-dealer, is acting as principal or agent for
the Selling Stockholders, the compensation to be received by underwriters who
may be selected by the Selling Stockholders, or any broker-dealer, acting as
principal or agent for the Selling Stockholders and the compensation to be
received by other broker-dealers, in the event the compensation of such other
broker-dealers is in excess of usual and customary commissions, will, to the
extent required, be set forth in a supplement to this Prospectus (the
"Prospectus Supplement"). Any dealer or broker participating in any distribution
of the Shares may be required to deliver a copy of this Prospectus, including
the Prospectus Supplement, if any, to any person who purchases any of the Shares
from or through such dealer or broker.
14
<PAGE>
The Company has advised the Selling Stockholders that during such time as
they may be engaged in a distribution of the Shares included herein they are
required to comply with Regulation M promulgated under the Exchange Act. With
certain exceptions, Regulation M precludes any Selling Shareholder, any
affiliated purchasers and any broker-dealer or other person who participates in
such distribution from bidding for or purchasing, or attempting to induce any
person to bid for or purchase any security which is the subject of the
distribution until the entire distribution is complete. Regulation M also
prohibits any bids or purchases made in order to stabilize the price of a
security in connection with the distribution of that security. All of the
foregoing may affect the marketability of the Common Stock.
It is anticipated that the Selling Stockholders will offer all of the Shares
for sale. Further, because it is possible that a significant number of Shares
could be sold at the same time hereunder, such sales, or the possibility
thereof, may have a depressive effect on the market price of the Company's
Common Stock.
LEGAL MATTERS
The validity of the Shares offered hereby will be passed upon for the
Company by Morgan, Lewis & Bockius LLP, New York, New York.
EXPERTS
The financial statements of Visual Edge Systems Inc. as of December 31, 1997
and for the year then ended incorporated by reference in this registration
statement have been audited by Arthur Andersen, LLP, independent certified
public accountants, as indicated in their report with respect thereto, and are
included herein in reliance upon the authority of said firm as experts in
accounting and auditing. The financial statements of Visual Edge Systems Inc. as
of December 31, 1996 and for the year then ended have been incorporated by
reference herein from the Company's 1997 Annual Report on Form 10-KSB in
reliance upon the report of KPMG Peat Marwick LLP, independent certified public
accountants, included therein, and upon the authority of said firm as experts in
accounting and auditing.
15
<PAGE>
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- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR ANY OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE SELLING STOCKHOLDERS. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER
TO BUY, ANY SECURITY BY ANY PERSON IN ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION IS UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE
MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, IMPLY THAT THE INFORMATION IN
THIS PROSPECTUS IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE OF THIS
PROSPECTUS.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Available Information........................... 2
Incorporation of Certain Documents by
Reference..................................... 2
The Company..................................... 4
Risk Factors.................................... 7
Use of Proceeds................................. 11
Selling Stockholders............................ 12
Plan of Distribution............................ 14
Legal Matters................................... 15
Experts......................................... 15
</TABLE>
VISUAL EDGE SYSTEMS, INC.
8,761,291 SHARES OF
COMMON STOCK
---------------------
PROSPECTUS
---------------------
APRIL , 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the expenses that will be incurred by the
Registrant in connection with the offering described in this Registration
Statement. All of such amounts (except the SEC Registration Fee) are estimated.
<TABLE>
<S> <C>
SEC Registration Fee............................................................... $ 7,916
Legal fees and expenses............................................................ 20,000
Accounting fees and expenses....................................................... 10,000
Printing and engraving expenses.................................................... 5,000
Miscellaneous...................................................................... 1,084
---------
Total.......................................................................... $ 44,000
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Generally, Section 145 of the General Corporation Law of the State of
Delaware (the "GCL") permits a corporation to indemnify certain persons made a
party or threatened to be made a party to an action by reason of the fact that
such person is or was a director, officer, employee or agent of the corporation
or is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation or enterprise. In the case of an action
by or in the right of the corporation, no indemnification may be made in respect
of any matter as to which such person was adjudged liable for negligence or
misconduct in the performance of such person's duty to the corporation unless
the Delaware Court of Chancery or the court in which such action was brought
determines that despite the adjudication of liability such person is fairly and
reasonably entitled to indemnity for proper expenses. To the extent such person
has been successful in the defense of any matter, such person shall be
indemnified against expenses actually and reasonably incurred by him.
Section 102(b)(7) of the GCL provides that a corporation may eliminate or
limit the personal liability of a director to the corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director,
provided that such provision shall not eliminate or limit the liability of a
director (i) for any breach of the director's duty of loyalty to the corporation
or its stockholders, (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the DGCL or (iv) for any transaction from which the director
derived an improper personal benefit. No such provision shall eliminate or limit
the liability of a director for any act or omission occurring prior to the date
when such provision becomes effective.
The Registrant has adopted provisions in its By-Laws which provide for
indemnification of its officers and directors to the full extent permitted under
Delaware law. The Registrant's Certificate of Incorporation includes provisions
to limit, to the full extent permitted by Delaware law, the personal liability
of directors of the Company for monetary damages arising from a breach of their
fiduciary duties as directors.
ITEM 16. EXHIBITS
See Exhibit Index.
II-1
<PAGE>
ITEM 17. UNDERTAKINGS
(1) The undersigned Registrant hereby undertakes that it will:
(a) File, during any period in which it offers or sells securities, a
post-effective amendment to this Registration Statement to include any
additional or changed material information on the plan of distribution.
(b) For determining any liability under the Securities Act, treat each
post-effective amendment as a new Registration Statement of the securities
offered, and the offering of securities at that time shall be deemed to be
the initial BONA FIDE offering thereof.
(c) File a post-effective amendment to remove from registration any of
the securities that remain unsold at the end of the offering.
(2) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by it is against
public policy as expressed in the Securities Act and will be governed by the
final adjudication of such issue.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized in the City of Boca Raton, State of Florida, on April 6, 1998.
<TABLE>
<S> <C> <C>
VISUAL EDGE SYSTEMS INC.
By: /s/ EARL T. TAKEFMAN
-----------------------------------------
Earl T. Takefman
CHIEF EXECUTIVE OFFICER
</TABLE>
Each person whose signature appears below hereby authorizes and constitutes
Earl Takefman and Richard Parker, and each of them singly, his true and lawful
attorneys-in-fact with full power of substitution and resubstitution, for him
and in his mane, place and stead, in any and all capacities (including his
capacity as a director and/or officer of Visual Edge Systems Inc.) to sign and
file any and all amendments (including post-effective amendments) to this
Registration Statement, and to sign any registration statement for the same
offering covered by this Registration Statement that is to be effective upon
filing pursuant to Rule 462(b) promulgated under the Securities Act of 1933, and
all post-effective amendments thereto, and to file the same, with all exhibits
thereto, and other documents in connection therewith with the Securities and
Exchange Commission, and he hereby ratifies and confirms all that said
attorneys-in-fact or any of them, or his substitutes, may lawfully do or cause
to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE CAPACITY IN WHICH SIGNED DATE
- ------------------------------ --------------------------- ----------------
Director, Chief Executive
/s/ EARL T. TAKEFMAN Officer,
- ------------------------------ (Principal Executive April 6, 1998
Earl T. Takefman Officer)
Chief Financial Officer
/s/ MELISSA FORZLY (Principal Financial
- ------------------------------ Officer and Principal April 6, 1998
Melissa Forzly Accounting Officer)
/s/ ALAN L. LUBELL Chairman of the Board
- ------------------------------ April 6, 1998
Alan L. Lubell
Director
- ------------------------------ April , 1998
Eddie Einhorn
/s/ MARK HERSHHORN Director
- ------------------------------ April 6, 1998
Mark Hershhorn
/s/ BERYL ARTZ Director
- ------------------------------ April 6, 1998
Beryl Artz
/s/ RICHARD PARKER Director
- ------------------------------ April 6, 1998
Richard Parker
II-3
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- --------------------------------------------------------------------------------------------------------
<C> <S>
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 March 1997 Bridge Financing (Incorporated by
reference to the Registrant's Registration Statement on Form SB-2 (Registration No. 333-24675) filed
April 7, 1997)
4.6 Form of Common Stock Purchase Warrant issued to investors in the June 1997 Bridge Financing
(Incorporated by reference to Exhibit 99.4 to the Registrant's Current Report on Form 8-K filed June 23,
1997)
4.7 Form of Convertible Note issued to investors in the June 1997 Bridge Financing (Incorporated by
reference to Exhibit 99.5 to the Registrant's Current Report on Form 8-K filed June 23, 1997)
4.8 Form of Common Stock Purchase Warrant issued to Vision Financial Group, Inc. (Incorporated by reference
to Exhibit 4.8 to the Registrant's Quarterly Report on Form 10-QSB filed November 14, 1997)
4.9 Form of Common Stock Purchase Warrant issued to investors in the June 1997 Bridge Financing in
connection with the amendment to such financing (Incorporated by reference to Exhibit 99.3 to the
Registrant's Current Report on Form 8-K filed February 9, 1998)
5 Opinion of Morgan, Lewis & Bockius LLP*
23.1 Consent of Morgan, Lewis & Bockius LLP (included in Exhibit 5)*
23.2 Consent of KPMG Peat Marwick LLP*
23.3 Consent of Arthur Andersen LLP*
24 Power of Attorney (included with the signature page hereof)*
</TABLE>
- ------------------------
* Filed herewith.
<PAGE>
Exhibit 5.1
April 7, 1998
Visual Edge Systems Inc.
2424 North Federal Highway, Suite 100
Boca Raton, FL 33431
Re: Issuance of Shares Pursuant to
Registration Statement on Form S-3
----------------------------------
Ladies and Gentlemen:
We have acted as counsel to Visual Edge Systems Inc., a Delaware
corporation (the "Company"), in connection with the preparation and filing
with the Securities and Exchange Commission under the Securities Act of 1933,
as amended (the "Act"), of a Registration Statement on Form S-3 (the
"Registration Statement") relating to the sale of an aggregate of 8,761,291
shares (the "Shares") of the Company's Common Stock, par value $.01 per share
(the "Common Stock").
In so acting, we have examined originals, or copies certified or
otherwise identified to our satisfaction, of the Certificate of Incorporation
of the Company, as amended, the By-Laws of the Company, as amended, and such
other documents, records, certificates and other instruments as in our
judgment are necessary or appropriate for purposes of this opinion. We have
assumed that (i) the Registration Statement, and any amendments thereto, will
have become effective, (ii) such Shares will have been duly authorized and
reserved for issuance and certificates evidencing the same will have been
duly executed and delivered against receipt of the consideration approved by
the Board of Directors of the Company, or a committee thereof, which will be
no less than the par value thereof, and (iii) the Shares will be issued in
compliance with applicable federal and state securities laws.
Based on the foregoing, we are of the opinion that the Shares,
when issued, will be duly authorized, validly issued, fully paid and
non-assessable.
We render this opinion as members of the Bar of the State of New York and
express no opinion as to any law other than the General Corporation Law of
the State of Delaware.
<PAGE>
We consent to the use of this opinion as an exhibit to the Registration
Statement and to the use of our name under the caption "Legal Matters" in the
Registration Statement. In giving this consent, we do not admit that we are
acting within the category of persons whose consent is required under Section
7 of the Act.
Very truly yours,
/s/ Morgan, Lewis & Bockius LLP
-------------------------------
Morgan, Lewis & Bockius LLP
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Visual Edge Systems Inc.
We hereby consent to the incorporation by reference in the Prospectus
constituting this Registration Statement on Form S-3 of Visual Edge Systems Inc.
of our report dated January 24, 1997 except as to note 9(b), which is as of
April 3, 1997 included in the 1997 Annual Report on Form 10-KSB. Our report
contains an explanatory paragraph that states that the Company has suffered
recurring losses through 1996 and has contractual commitments under a license
agreement which raise substantial doubt about its ability to continue as a going
concern unless additional financing or equity is obtained. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
We also consent to the references to our firm under the heading "Experts" in
the Prospectus, which is part of such Registration Statement on Form S-3.
/S/ KPMG PEAT MARWICK LLP
Fort Lauderdale, Florida
<PAGE>
EXHIBIT 23.3
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
As independent certified public accountants, we hereby consent to the
incorporation by reference in this Registration Statement of our report dated
February 20, 1998 (except with respect to the matters discussed in Notes 5(b),
(c) and 10, as to which the date is April 4, 1998) included in Visual Edge
Systems Inc.'s 1997 Annual Report on Form 10-KSB for the year ended December 31,
1997 and to all references to our Firm included in this Registration Statement.
/S/ ARTHUR ANDERSEN LLP
Miami, Florida,
April 7, 1998.
