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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
[x] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 2000
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from _____________________ to ________________________
Commission file number: 0-20995
VISUAL EDGE SYSTEMS INC.
(Exact name of small business issuer as specified in its charter)
DELAWARE 13-3778895
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
901 YAMATO ROAD, SUITE 175, BOCA RATON, FLORIDA 33431
(Address of principal executive offices)
(561) 750-7559
(issuer's telephone number)
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the issuer was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date.
As of August 7, 2000, the issuer had 19,993,297 shares of common stock
outstanding.
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VISUAL EDGE SYSTEMS INC.
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
PART I FINANCIAL INFORMATION
ITEM 1. Financial Statements:
Balance Sheets......................................................................3
June 30, 2000 and December 31, 1999 (unaudited)
Statements of Operations............................................................4
Three and Six Months Ended June 30, 2000 and 1999 (unaudited)
Statements of Cash Flows............................................................5
Six Months Ended June 30, 2000 and 1999 (unaudited)
Notes to Financial Statements.......................................................6
ITEM 2. Management's Discussion and Analysis or Plan of Operations..........................7
PART II OTHER INFORMATION
ITEM 1. Legal Proceedings..................................................................17
ITEM 2. Changes in Securities and Use of Proceeds..........................................18
ITEM 3. Defaults upon Senior Securities....................................................18
ITEM 4. Submission of Matters to a Vote of Security Holders................................19
ITEM 5. Other Information..................................................................20
ITEM 6. Exhibits and Reports on Form 8-K...................................................20
Signature..........................................................................23
</TABLE>
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VISUAL EDGE SYSTEMS INC.
BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
ASSETS December 31, 1999 June 30, 2000
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<S> <C> <C>
Current assets:
Cash and cash equivalents $ 19,724 $ 17,350
Accounts receivable 32,765 78,887
Inventories 57,894 45,378
Prepaid expenses - advance royalties 150,000 117,781
Other current assets 49,407 83,056
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Total current assets 309,790 342,452
Fixed assets, net 1,404,097 976,211
Intangible assets, net 55,925 --
Investments - restricted 200,000 --
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Total assets $ 1,969,812 $ 1,318,663
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LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable $ 137,772 $ 384,796
Accrued expenses 476,229 734,761
Preferred stock dividend payable -- 393,570
Other current liabilities 78,151 201,711
Current maturities of equipment loans 174,779 --
Convertible debt -- 1,500,000
Short-term notes payable -- 231,209
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Total current liabilities 866,931 3,446,047
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Convertible debt 1,406,762 --
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Total liabilities 2,273,693 3,446,047
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Commitments and contingencies (Notes 1, 2 and 3)
Stockholders' deficit:
Series A-2 Convertible Preferred Stock, $.01 par value, 6,000,000 4,373,000
5,000,000 shares authorized, 6,000 shares issued and
outstanding at December 31, 1999 and 4,373 issued and
outstanding at June 20, 2000
Common stock, $.01 par value, 20,000,000 shares authorized, 103,984 199,933
10,398,440 shares issued and outstanding at December 31,
1999 and 19,993,297 shares issued and outstanding at June
30, 2000
Additional paid in capital 17,765,679 19,296,731
Accumulated deficit (24,173,544) (25,997,048)
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Total stockholders' deficit (303,881) (2,127,384)
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Total liabilities and stockholders' deficit $ 1,969,812 $ 1,318,663
</TABLE>
The accompanying notes are an integral part of these financial statements.
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VISUAL EDGE SYSTEMS INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED FOR THE SIX MONTHS ENDED
JUNE 30, JUNE 30,
--------------------------------- ---------------------------------
1999 2000 1999 2000
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Sales $ 916,904 $ 540,643 $ 1,237,301 $ 645,895
Cost of sales 612,420 417,343 1,091,797 557,398
------------ ------------ ------------ ------------
Gross profit (loss) 304,484 123,300 145,504 88,497
------------ ------------ ------------ ------------
Operating expenses:
General and administrative 638,541 271,962 1,250,016 692,191
Selling and marketing 94,288 112,318 274,739 225,639
Total operating expenses 732,829 384,280 1,524,755 917,830
------------ ------------ ------------ ------------
Operating loss (428,345) (260,980) (1,379,251) (829,333)
------------ ------------ ------------ ------------
Other income (expense):
Interest income 6,945 541 42,394 2,400
Interest expense (48,585) (222,238) (101,224) (306,193)
Amortization of deferred financing fees (53,630) (42,176) (105,869) (85,866)
State income tax -- (1,071) -- (2,443)
Loss on sale of fixed assets -- 36,313 -- (26,719)
Financing fees -- (2,450) -- (5,224)
Unusual and non-recurring expenses -- (176,556) -- (176,556)
------------ ------------ ------------ ------------
Total other income (expense) (95,270) (407,637) (164,699) (600,601)
------------ ------------ ------------ ------------
Net loss before preferred stock dividends (523,615) (668,617) (1,543,950) (1,429,934)
Preferred stock dividends -- (393,570) -- (393,570)
Net loss allocable to common stockholders $ (523,615) $ (1,133,742) $ (1,543,950) $ (1,823,504)
------------ ------------ ------------ ------------
Net loss per share, basic and diluted $ (0.05) $ (0.06) $ (0.15) $ (0.09)
------------ ------------ ------------ ------------
Weighted average common shares outstanding 10,398,440 19,993,297 10,398,440 19,993,297
------------ ------------ ------------ ------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
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VISUAL EDGE SYSTEMS INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED
JUNE 30,
-------------------------------
1999 2000
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<S> <C> <C>
Operating activities:
Net loss $(1,543,950) $(1,429,934)
Adjustments to reconcile net loss to net cash used in operating activities:
Non-cash stock compensation expense 17,500 --
Depreciation 445,192 369,634
Amortization of deferred financing expenses 105,869 85,866
Loss on disposal of fixed assets -- 26,719
Changes in assets and liabilities:
Increase in accounts receivable (39,488) (46,122)
Increase in other current assets (18,631) (33,649)
Decrease in prepaid expense - advance royalties 55,185 32,219
Decrease in inventories (5,291) 12,516
Decrease in restricted investments 151,137 200,000
(Decrease) increase in accounts payable (78,921) 247,024
(Decrease) increase in accrued expenses (68,674) 258,532
Increase in other current liabilities 90,080 123,560
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Net cash used in operating activities (889,992) (153,635)
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Investing activities:
Capital expenditures (20,405) (28,127)
Proceeds from the sale of assets 51,145 122,958
Proceeds from the sale of short-term investments 925,000 --
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Net cash provided by investing activities 955,740 94,831
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Financing activities:
Repayment of borrowings (289,204) (174,779)
Borrowings on short-term notes payable -- 231,209
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Net cash provided by (used in) financing activities (289,204) (56,430)
----------- -----------
Net change in cash and cash equivalents (223,456) (2,374)
Cash and cash equivalents at beginning of period 244,346 19,724
----------- -----------
Cash and cash equivalents at end of period $ 20,890 $ 17,350
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Supplemental disclosure of cash flow information:
Cash paid for interest $ 48,585 $ 24,563
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</TABLE>
The accompanying notes are an integral part of these financial statements.
5
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VISUAL EDGE SYSTEMS INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
(1) BASIS OF PRESENTATION
The financial statements included herein have been prepared by Visual
Edge Systems Inc. ("Visual Edge" or the "Company") without audit, pursuant to
the rules and regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations. In the opinion of
management, the accompanying unaudited financial statements include all
necessary adjustments (consisting only of normal recurring adjustments)
necessary to present fairly the financial position, results of operations and
cash flows of the Company. The results of operations and cash flows for the
three and six month periods ended June 30, 2000, are not necessarily indicative
of the results of operations or cash flows that may be reported for the year
ended December 31, 2000. The unaudited financial statements included herein
should be read in conjunction with the audited financial statements and the
notes thereto included in the Company's Form 10-KSB/A for the year ended
December 31, 1999.
The unaudited financial statements present the information based on the
number of shares of common stock outstanding using 19,993,297 shares. In June
2000, the Company recognized the conversion by Infinity Investors Limited
("Infinity") of 1,627 shares of Series A-2 Convertible Preferred Stock of the
Company owned by Infinity into 9,594,857 shares of common stock effective as of
August 13, 1999. In July 2000, the Company entered into the Agreement and Fourth
Amendment to Bridge Securities Purchase Agreement and Related Documents (the
"Fourth Amendment") with Infinity, Glacier Capital Limited ("Glacier") and
Summit Capital Limited ("Summit") whereby, upon satisfaction of certain
conditions, each of Infinity, Glacier and Summit will convert all shares of the
Company's Series A-2 Convertible Preferred Stock and Convertible Notes
(collectively, the "Convertible Securities") owned by it based on a formula
further described in "Recent Developments" below. The number of shares of common
stock issuable upon a conversion using this formula is 26,756,660 before taking
into account the reverse stock split discussed in "Recent Developments" below.
(2) GOING CONCERN MATTERS
The accompanying financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and the satisfaction
of liabilities in the normal course of business. As shown in the financial
statements, during the six months ended June 30, 1999 and 2000, the Company
incurred losses before preferred stock dividends of $1,543,950 and $1,429,934,
respectively, and at June 30, 2000, its current liabilities exceeded its current
assets by approximately $3,103,595 and its accumulated deficit is approximately
$25,997,048. These factors, among others, indicate that the Company may be
unable to continue as a going concern.
The financial statements do not include any adjustments relating to the
recoverability and classification of asset carrying amounts or the amount and
classification of liabilities that might be necessary should the Company be
unable to continue as a going concern. The Company's continuation as a going
concern is dependent upon its ability to (a) generate sufficient cash flow to
meet its obligations on a timely basis, (b) obtain additional financing as may
be required, and (c) ultimately attain profitability. The Company is attempting
to obtain additional bank or equity financing to alleviate its cash flow
constraints.
(3) DEFAULT ON SENIOR SECURITIES
Visual Edge has outstanding $1,500,000 face amount of Convertible Notes
held by Infinity, Summit and Glacier. Interest on the Convertible Notes is
payable quarterly. Visual Edge has not paid interest owed on Visual Edge's
outstanding Convertible Notes since March 31, 1999. As of June 30, 2000, the
amount of unpaid accrued interest on the Convertible Notes was $343,892. The
non-payment of such interest constitutes an event of default under the
Convertible Notes and related agreements. As of the date of this filing, the
holders of the Convertible Notes have neither declared a default nor given
notice of acceleration of the amounts owed under the Convertible Notes or the
taking of any other recourse with respect to any default.
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Under the Fourth Amendment, each of Infinity, Glacier and Summit has
agreed, upon satisfaction of certain conditions, not to convert the Convertible
Securities owned by it or exercise any of its remedies against the Company
before August 9, 2000. Furthermore, if the conditions are satisfied, Infinity,
Glacier and Summit will convert their Convertible Securities on a formula
further described in "Recent Developments" below. The number of shares of common
stock issuable upon a conversion the formula mentioned above is 26,756,660
before taking into account the reverse stock split discussed in "Recent
Developments" below.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
The following discussion contains, in addition to historical
information, "forward-looking statements" with respect to Visual Edge which
represent the Company's expectations or beliefs, including, but not limited to,
statements concerning industry performance, the Company's operations,
performance, financial condition, growth strategies, margins, and growth in
sales of the Company's products. For this purpose, any statements contained in
this report that are not statements of historical fact may be deemed to be
forward-looking statements. Without limiting the generality of the foregoing,
words such as "may," "will," "expect," "believe," "anticipate," "intend,"
"could," "estimate," or "continue" or the negative or other variations thereof
or comparable terminology are intended to identify forward-looking statements.
These statements by their nature involve substantial risks and uncertainties,
certain of which are beyond the Company's control, and actual results may differ
materially depending on a variety of important factors, including those
discussed in the Company's filings with the Securities and Exchange Commission
and the section entitled "Risk Factors" contained herein.
GENERAL
Visual Edge was organized to develop, market and sell personalized
CD-ROM and videotape golf lessons featuring One-on-One instruction by leading
professional golfer Greg Norman. Visual Edge 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 One-on-One golf lesson. Our One-on-One personalized golf lesson
analyzes a golfer's swing by comparing it to Greg Norman's swing at several
different club positions from two camera angles. Greg Norman's pre-recorded
instructional commentary and analysis and computer graphics highlight important
golf fundamentals intended to improve a golfer's performance. Golf instructor
Jim McLean provides pre-recorded drills and instruction designed to correct the
specific errors made by the golfer. We sell our products under the name
"One-on-One with Greg Norman".
Our marketing strategy is to sell One-on-One golf lessons to various
organizers of amateur corporate, charity and member golf tournaments (who
typically offer gifts to tournament participants), golf professionals at private
and daily fee golf courses and driving ranges and indoor event planners who
organize trade shows, conventions, sales meetings, retail store openings and
promotions.
At a One-on-One event, Visual Edge's team of technicians uses portable
video and computer equipment or a truck or other vehicle outfitted as a mobile
production facility. When portable equipment is used, the digitized swing
recordings are electronically forwarded to Visual Edge's production facility and
the completed product is delivered to the golfer using electronic mail. Visual
Edge locates its One-on-One vans in selected geographic areas that service golf
courses and driving ranges throughout the United States. When mobile production
vehicles are used, they are driven to golf courses and corporate events to film
participants and produce the One-on-One lessons on-site.
The majority of our cost of sales is contributed to Visual Edge's fixed
operating costs which includes operator salaries, vehicle storage and
depreciation and Visual Edge's fixed overhead expenses. Approximately 25.0% of
the cost of sales are variable costs related to sales and production. These
costs include the cost of the videotapes and CD-ROMs, royalties to Greg Norman
and sales commissions. Visual Edge believes that significantly higher sales
levels are needed before it may be able to generate profits. Management believes
that Visual Edge will not achieve such sales levels in 2000 and no assurance can
be given that Visual Edge will ever achieve such sales levels or that the
variable costs will remain constant as a percent of sales or that Visual Edge
will not incur additional fixed costs.
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Visual Edge has entered into an agreement with the Major League
Baseball Players Association to produce Internet and other instructional
products for baseball players of all skill levels worldwide. Visual Edge expects
that this new product will feature the Major League Baseball stars, such as
Barry Bonds, Jose Canseco, Nomar Garciaparra, J. Giambi, Shawn Green, Andruw
Jones, Chipper Jones, Mark McGwire, Mike Piazza, Manny Ramirez and Alex
Rodriguez. The filming of theses stars has already been completed. Visual Edge
expects the first product to be available for distribution later this year.
Visual Edge has announced that it intends to expand its operations to
include the operation, development and financing of technology-oriented
companies through subsidiaries and affiliated companies as further described
below under "Recent Developments."
RESULTS OF OPERATIONS
Three months ended June 30, 2000 compared to the three months ended June 30,
1999
Sales for the three months ended June 30, 2000 decreased $376,261 or
41.0% to $540,643 from $916,904 for the three months ended June 30, 1999. This
decrease in sales is primarily due to fewer events being performed.
Additionally, Visual Edge's Canadian operations and the operations of Visual
Edge's licensee for England ceased in the middle of 1999. Visual Edge has
reduced the number of sales people by more than half and reduced the cost of a
sale by more than 33.0% in connection with pursuing a new sales strategy
including the Jim McLean/KSL Resorts program.
The cost of sales for the three months ended June 30, 2000 decreased
$195,077 or 31.9% to $417,343 from $612,420 for the three months ended June 30,
1999. This decrease in the cost of sales is attributable to Visual Edge's
reduced sales and the increased use of portable video equipment at events with
production occurring at Visual Edge's production facility in substitution for
mobile production vehicles. Depreciation on mobile production vehicles not
currently in use accounted for approximately 20.0% of the cost of sales for the
six months ended June 30, 2000.
Operating expenses for the three months ended June 30, 2000 decreased
$348,549 or 47.6% to $384,280 from $732,829 for the three months ended June 30,
1999. This decrease is attributable primarily to a decrease in executive
salaries and benefits as well as a reduction in salaried personnel. Our employee
count decreased from 38 on June 30, 1999 to 18 on June 30, 2000. This decrease
was partially offset by an increase in legal fees.
As a result of the factors described above, operating loss for the
three months ended June 30, 2000 decreased $167,365 or 39.1% to $260,980 from
$428,345 for the three months ended June 30, 1999.
Interest income for the three months ended June 30, 2000 decreased
$6,404 to $541 from $6,945 for the three months ended June 30, 1999. The
decrease is attributable to a reduction in restricted investments due to the
redemption of certificates of deposit which were used to secure equipment
financing that was terminated in January 2000.
Interest expense for the three months ended June 30, 2000 increased
$173,653 or 357.4% to $222,238 from $48,585 for the three months ended June 30,
1999. This increase in interest expense is primarily due to short term notes
payable obtained in 2000 as well as a default rate of interest that accrued on
the Convertible Notes. The existence of an event of default increased the
interest rate on the Convertible Notes from 8.25% to 18.0% per annum.
Visual Edge has classified certain expenses as unusual and
non-recurring. These expenses include legal expenses pertaining to the
reorganization of Visual Edge, as well as one time legal expenses unrelated to
Visual Edge's normal operations, and are one-time expenses which are not likely
to recur in the future. There were no such costs similar to these expenses in
the comparable period of the prior year.
Net loss before preferred stock dividends for the three months ended
June 30, 2000 increased $145,002 or 27.7% to $668,617 from $523,615 for the
three months ended June 30, 1999. Net loss per share for the three months ended
June 30, 2000 increased 20.0% to $.06 from $.05 for the three months ended June
30, 1999.
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\
Six months ended June 30, 2000 compared to the six months ended June 30, 1999
Sales for the six months ended June 30, 2000 decreased $591,406 or
47.8% to $645,895 from $1,237,301 for the six months ended June 30, 1999. This
decrease in sales is primarily due to fewer events being performed.
Additionally, Visual Edge's Canadian operations and the operations of Visual
Edge's licensee for England ceased in the middle of 1999. Visual Edge has
reduced the number of sales people by more than half and reduced the cost of a
sale by more than 33.0% in connection with pursuing a new sales strategy
including the Jim McLean/KSL Resorts program.
The cost of sales for the six months ended June 30, 2000 decreased
$534,399 or 48.9% to $557,398 from $1,091,797 for the six months ended June 30,
1999. This decrease in the cost of sales is attributable to Visual Edge's
reduced sales and the increased use of portable video equipment at events with
production occurring at Visual Edge's production facility in substitution for
mobile production vehicles. Depreciation on mobile production vehicles not
currently in use accounted for approximately 20.0% of the cost of sales for the
six months ended June 30, 2000.
Operating expenses for the six months ended June 30, 2000 decreased
$606,925 or 39.8% to $917,830 from $1,524,755 for the six months ended June 30,
1999. This decrease is primarily attributable to a decrease in executive
salaries and benefits and, to a lesser degree, is attributable to a reduction in
salaried personnel. Our employee count decreased from 38 on June 30, 1999 to 18
on June 30, 2000. This decrease was partially offset by an increase in legal
fees.
As a result of the factors described above, the operating loss for the
six months ended June 30, 2000 decreased $549,918 or 39.9% to $829,333 from
$1,379,251 for the six months ended June 30, 1999.
Interest income for the six months ended June 30, 2000 decreased
$39,994 to $2,400 from $42,394 for the six months ended June 30, 1999. This
decrease is a result of a reduction in restricted investments due to the
redemption of certificates of deposit which were used to secure equipment
financing that was terminated in January 2000.
Interest expense for the six months ended June 30, 2000 increased
$204,969 or 202.5% to $306,193 from $101,224 for the six months ended June 30,
1999. This increase in interest expense is primarily due to short term notes
payable obtained in 2000 as well as a default rate of interest that accrued on
the Convertible Notes. The event of default increased the interest rate from
8.25% to 18.0% per annum.
Visual Edge has classified certain expenses as unusual and
non-recurring. These expenses include legal expenses pertaining to the
reorganization of Visual Edge, as well as one time legal expenses unrelated to
Visual Edge's normal operations, and are one-time expenses which are not likely
to recur in the future. There were no such costs similar to these expenses in
the comparable period of the prior year.
Net loss before preferred stock dividends for the six months ended June
30, 2000 increased $114,016 or 7.4% to $1,429,934 from $1,543,950 for the six
months ended June 30, 1999. Net loss per share, basic and diluted, for the six
months ended June 30, 2000 decreased 40.0% to $.09 from $.15 for the six months
ended June 30, 1999.
LIQUIDITY AND CAPITAL RESOURCES
Visual Edge does not currently maintain a bank credit facility. Visual
Edge has historically financed its operations primarily through the sale of
equity securities or instruments convertible into equity securities. On June 30,
2000, Visual Edge had cash and cash equivalents of $17,350 and a working capital
deficit of approximately $3,103,595, as compared to cash and cash equivalents of
$19,724 and a working capital deficit of approximately $557,141 at December 31,
1999. Net cash used in operating activities for the six months ended June 30,
2000 was $153,635. Net cash provided by investing activities in the six months
ended June 30, 2000 was $94,831, and $56,430 was provided by financing
activities for a total decrease in cash and cash equivalents of $2,374. Net cash
used in operating activities for the six months ended June 30, 1999 was
$889,992. Net cash provided by investing activities in the six months ended June
30, 1999 was $955,740, and $289,204 was used in financing activities, for a
total decrease in cash and cash equivalents in the six months ended June 30,
1999 of $223,456.
On June 30, 2000, Visual Edge had an accumulated deficit of
$25,997,048, as compared to an accumulated deficit of $24,173,544 at December
31, 1999.
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Visual Edge has outstanding $1,500,000 face amount of Convertible Notes
held by Infinity, Summit Capital Limited and Glacier Capital Limited. Interest
an the Convertible Notes is payable quarterly. Visual Edge has not paid interest
owed on Visual Edge's outstanding Convertible Notes since March 31, 1999. As of
June 30, 2000, the amount of unpaid accrued interest on the Convertible Notes
was $343,892. The non-payment of such interest constitutes an event of default
under the Convertible Notes and related agreements. As of the date of this
filing, the holders of the Convertible Notes have neither declared a default nor
given notice of acceleration of the amounts owed under the Convertible Notes or
the taking of any other recourse with respect to any default.
In addition, on June 30, 2000 Visual Edge was obligated to pay a
dividend to the holders of its Series A-2 Convertible Preferred Stock. The
amount of this dividend is $393,570 as of June 30, 2000, which has not been
distributed. The non-payment of these dividends constitutes an event of default
under the terms of the Series A-2 Convertible Preferred Stock as of the date of
this filing, the holders of the Series A-2 Convertible Preferred Stock have not
declared a default or given notice of the exercise of any other remedy under the
terms of the Series A-2 Convertible Preferred Stock.
Visual Edge will require further cash or a reduction in operating
expenses at the current revenue levels to satisfy Visual Edge's contemplated
working capital requirements for the foreseeable future. If Visual Edge is
unable to raise cash or finance its operations from cash flow, it may exhaust
its cash resources by the year-end and may be forced to curtail or cease its
operations.
The financial statements have been prepared assuming that Visual Edge
will continue as a going concern and do not include any adjustments to reflect
the possible future effects on the recoverability and classification of assets
and the amount of classification of liabilities that may result from the
possible inability of Visual Edge to continue as a going concern.
SEASONALITY
The Company's business has historically been seasonal with higher sales
in the second and third quarters of each fiscal year. The Company believes
greater numbers of golf events are held during the warm months of the year.
RECENT DEVELOPMENTS
Amendment to Securities Purchase Agreement
In June 1997 the Company arranged a three-year $7.5 million debt and
convertible equity facility, which is referred to as the Infinity Financing,
with a group of investment funds, including Infinity. Under the Bridge
Securities Purchase Agreement relating to the Infinity Financing, including the
amendments that have since been made to such agreement, the Company issued to
the investment funds shares of common stock and Convertible Securities. In
August 1999, Infinity converted 1,627 shares of the Series A-2 Convertible
Preferred Stock into 9,594,857 shares of Visual Edge's common stock, which
Visual Edge recognized in June 2000 effective as of August 13, 1999 after the
dismissal of litigation relating to the conversion.
The principal amounts due under the Convertible Notes matured in June
2000, and those amounts, as well as unpaid interest on the Convertible Notes and
dividends on the Series A-2 Convertible Preferred Stock, remain unpaid. As a
result of the Company's failure, among other matters, to pay amounts of
principal, interest and dividend payments owed to the holders of the Convertible
Securities, events of default exist under the Infinity Financing. Because of the
existence of events of default, the holders of the Convertible Securities may
take any and all remedies available to them under the Securities Purchase
Agreement and related documents, including without limitation the Security
Agreement among the Company and the holders of the Convertible Securities, which
grants to the holders a security interest in substantially all of the Company's
assets.
The holders of the Convertible Securities have entered into the Fourth
Amendment to the Bridge Securities Purchase Agreement and Related Documents with
Visual Edge providing that, subject to the conditions contained in the
agreement, the holders will not convert their Convertible Securities or take any
other action as a remedy under the Bridge Securities Purchase Agreement before
August 9, 2000. Furthermore, if the conditions are satisfied, the
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holders of the Convertible Securities will convert all the Convertible
Securities based on a formula of four (4) shares of common stock for each $1.00
of principle and interest outstanding under the Convertible Notes and for each
$1.00 of liquidation amount of the Series A-2 Convertible Preferred Stock and of
unpaid dividends. The number of shares of common stock issuable upon a
conversion using this formula is 26,756,660 before taking into account the
reverse stock split discussed below.
The conditions the Company must fulfill include:
o The Company must have effected a reverse stock split of which
converts at least four (4) shares of its common stock into one (1)
share of common stock.
o The Company must have effected the sale and issuance of its
securities to investors providing net proceeds of at least $4.0
million to the Company.
o The Company must have secured the services of Pierre Koshakji and
Johann Schotte as officers and directors of the Company. Messrs.
Koshakji and Schotte have consented to serving in these positions,
subject to the Company fulfilling certain conditions.
o The Company must have paid Infinity approximately $39,000, an
amount which has been advanced by Infinity to the Company for
working capital purposes.
o The Company must have paid Infinity approximately $180,000, an
amount which has been advanced by Infinity to the Company for
working capital purposes, or must have restructured the terms of
this advanced amount on terms acceptable to Infinity.
o The Company must have consummated its investment in Hencie, Inc.,
which is further discussed below.
In connection with each of these actions, Infinity intends to transfer
shares of the Company's common stock to Entertainment Education Enterprises
Corporation (or its designee), which is referred to in this Report as E3. The
number of shares that Infinity will sell to E3 is 27,479,412 before taking into
account the reverse stock split discussed above. As a result of this transfer of
securities, E3 will hold approximately 59% of the Company's outstanding common
stock. If this transfer takes place, E3 will control the Company.
Visual Edge has executed a term sheet to invest approximately $2.8
million in Hencie, Inc. ("Hencie") for shares of Series B Redeemable Convertible
Preferred Stock representing ownership of approximately 10.0% of the issued and
outstanding capital stock of Hencie on a fully diluted basis. Hencie is a
Texas-based corporation that provides IT, systems integration and consulting
services for e-commerce software implementation. The term sheet contemplates the
grant of an option to Visual Edge to purchase additional shares in an amount
equal to 10.0% of the outstanding common stock of Hencie for approximately $3.8
million. The term sheet also contemplates that Visual Edge will have the right
to elect one member to the Board of Directors of Hencie and that the President
and Chief Executive Officer of Hencie will be elected to the Board of Advisors
of Visual Edge.
We cannot assure our investors that the anticipated transactions will
close, that such transactions will prove successful or that unforeseen
developments will not occur, any of which could have a material adverse effect
on our business, financial condition and results of operations.
Corporate changes
Visual Edge intends to expand its operations to include the operation,
financing and development of technology-oriented companies internationally
through subsidiaries and affiliated companies. Visual Edge plans to make
acquisitions and take strategic positions in other technology-related companies
that provide services and/or products that complement its strategy and
subsidiaries. Visual Edge intends to be structured to emphasize and promote
opportunities for cross business relationships among its network of companies,
and to develop strategic
11
<PAGE> 12
partnerships with established global technology companies, scientific
organizations and investment and consulting partners.
CERTAIN RISK FACTORS
Readers of this report on Form 10-QSB or any of our press releases
should carefully consider the following risk factors, in addition to the other
information contained herein. This report on Form 10-QSB and our press releases
contain statements of a forward-looking nature relating to future events or the
future financial performance of Visual Edge within the meaning of Section 27A of
the Securities Act of 1933, as amended, 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.
WE HAVE EXPERIENCED SIGNIFICANT AND CONTINUING LOSSES. As of June 30,
2000, Visual Edge had an accumulated deficit of $25,997,048 incurred a net loss
before preferred stock dividends of $1,429,934 for the six months ended June 30,
2000. We believe that Visual Edge will continue to incur losses until Visual
Edge generates sufficient revenues to offset the operating costs associated with
commercializing its products. These losses could limit our ability to grow and
to raise new funds and could ultimately jeopardize our ability to remain in
business.
OUR PERFORMANCE MAY PREVENT VISUAL EDGE FROM OBTAINING ADDITIONAL
CAPITAL. As a result of our continuing losses, the low market price of our
common stock and the delisting of our common stock from the Nasdaq SmallCap
Market, we believe that it will be very difficult, if not impossible, for Visual
Edge to raise additional capital in the future. As of June 30, 2000, Visual Edge
had a total of cash and cash equivalents of $17,350. Visual Edge is unlikely to
become profitable in the reasonably foreseeable future. Accordingly, if Visual
Edge cannot raise new funds, Visual Edge may exhaust its cash resources and be
unable to continue in business.
THE VALUE OF VISUAL EDGE'S SECURITIES COULD DECREASE UPON THE ISSUANCE
OF ADDITIONAL SECURITIES BY VISUAL EDGE. As of June 30, 2000 there were a
substantial number of outstanding options and warrants to purchase shares of our
common stock. The exercise of any of these options or warrants will also have a
dilutive effect on our stockholders. Furthermore, holders of such options or
warrants are more likely to exercise them at times when Visual Edge could obtain
additional equity capital on terms that are more favorable to us than those
provided in the options or warrants. As a result, exercise of the options or
warrants may adversely affect the terms of such financing. The sale of a
substantial number of shares of our common stock may adversely affect the
prevailing price of such common stock in the public market and may impair our
ability to raise capital through the sale of its equity securities.
VISUAL EDGE RELIES SIGNIFICANTLY ON ITS LICENSE WITH GREG NORMAN. In
connection with the production and promotion of our products, Visual Edge uses,
under a worldwide license, Greg Norman's name, likeness, endorsement and certain
trademarks. During 1999, Greg Norman and Great White Shark notified Visual Edge
of defaults by Visual Edge under the Greg Norman license. The parties have since
entered into an amended license agreement to allow Visual Edge to continue to
use its rights under the Greg Norman license. The Greg Norman license expires on
December 31, 2001, subject to termination pursuant to the terms thereunder. Our
business may be adversely affected if the Greg Norman license is terminated in
the future or if Greg Norman dies, becomes disabled, retires from tournament
play, experiences a significant decline in his performance at golf tournaments,
reduces his participation in golf tournaments, commits a serious crime or
performs any act which adversely affects his reputation. Visual Edge has
obtained a "key-man" life insurance policy on Greg Norman in the amount of
$10,000,000.
OUR COMMON STOCK HAS BEEN DELISTED FROM THE NASDAQ SMALLCAP MARKET AND
IS SUBJECT TO ADDITIONAL SIGNIFICANT RISKS. Because we were unable to meet
Nasdaq's listing requirements, Visual Edge was delisted from the Nasdaq SmallCap
Market in June 1999. The delisting of our common stock means that, among other
things, fewer investors have access to trade our common stock which will
12
<PAGE> 13
limit our ability to raise capital through the sale of our securities. In
addition, our common stock is subject to penny stock regulations, which could
cause fewer brokers and market makers to execute trades in our common stock.
This is likely to hamper our common stock trading with sufficient volume to
provide liquidity and could cause our stock price to further decrease.
The penny stock regulations require that broker-dealers who recommend
penny stocks to persons other than institutional accredited investors must make
a special suitability determination for the purchaser, receive the purchaser's
written agreement to the transaction prior to the sale and provide the purchaser
with risk disclosure documents which identify risks associated with investing in
penny stocks. Furthermore, the broker-dealer must obtain a signed and dated
acknowledgement from the purchaser demonstrating that the purchaser has actually
received the required risk disclosure document before effecting a transaction in
penny stock. These requirements have historically resulted in reducing the level
of trading activity in securities that become subject to the penny stock rules.
Holders of our common stock may find it more difficult to sell their shares of
common stock, which is expected to have an adverse effect of the market price of
the common stock.
WE ARE AT RISK OF SECURITIES CLASS ACTION LITIGATION DUE TO OUR STOCK
PRICE VOLATILITY. In the past, securities class action litigation has often been
brought against a company following periods of volatility in the market price of
its securities. We may be the target of similar litigation. Securities
litigation may result in substantial costs and divert management's attention and
resources, which may seriously harm our business, prospects, financial condition
and results of operations.
WE MUST BE ABLE TO IMPLEMENT OUR BUSINESS PLAN. Our plan of operation
and prospects are largely dependent upon our ability to achieve significant
market acceptance for our products, establish and maintain relationships with
our customers, successfully hire and retain skilled technical, marketing and
other personnel, and successfully develop, market and sell our products on a
timely and cost effective basis. There can be no assurance that Visual Edge will
be able to continue to implement our business plan. Failure to effectively
implement our business plan will have a material adverse effect on Visual Edge.
OUR PRODUCTS MAY BE SUBJECT TO PRODUCT OBSOLESCENCE OR SHORT PRODUCT
LIFE CYCLES BEFORE THEY ARE ACCEPTED. The markets for our products may be
characterized by rapidly changing technology which could result in product
obsolescence or short product life cycles. Our competitors could develop
technologies or products that render our products obsolete or less marketable.
Accordingly, our ability to compete may be depend upon our ability to
continually enhance and improve our products.
VISUAL EDGE HAS A LIMITED PRODUCT LINE. Visual Edge currently depends
entirely on the sales of a limited product line to generate revenues. Visual
Edge may develop other products in the future that may or may not be similar to
our current products. Visual Edge cannot assure that our current or future
products will prove to be commercially viable. Failure to achieve commercial
viability on a timely basis would cause Visual Edge to close our business.
INDUSTRY FACTORS BEYOND OUR CONTROL COULD AFFECT OUR FINANCIAL
PERFORMANCE. Our future operating results will depend on numerous factors beyond
our control, including:
o the popularity, price and timing of competitors' products
being introduced and distributed
o national, regional and local economic conditions (particularly
recessionary conditions adversely affecting consumer spending)
o changes in consumer demographics
o the availability and relative popularity of other forms of
sports and entertainment
o public tastes and preferences, which may change rapidly and
cannot be predicted
Our ability to plan for product development and promotional activities
may be affected by our ability to anticipate and respond to relatively rapid
changes in consumer tastes and preferences. To the extent that Visual Edge
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<PAGE> 14
targets consumers with limited disposable income, Visual Edge may find it more
difficult to price our products at levels which result in profitable operations.
OUR PRODUCTS ARE SUBJECT TO SEASONALITY. Our business may be affected
by seasonal weather conditions that may limit the golf seasons in certain
geographic areas. Such seasonal factors may result in fluctuations in our future
operating results. Our business has historically been seasonal with higher sales
in the second and third quarters of each fiscal year. Visual Edge believes
greater numbers of golf events are held during the warm months of the year.
VISUAL EDGE MAY NOT BE ABLE TO CARRY OUT OUR ACQUISITION STRATEGY.
Visual Edge has recently adopted an acquisition strategy to expand our product
offerings. This strategy focuses on technology companies. To be suitable for
acquisition by Visual Edge, these companies must be small enough to be
affordable yet profitable. These candidates may be few in number and may attract
offers from companies with greater financial resources than Visual Edge. We
cannot assure you that Visual Edge will be able to locate suitable acquisition
targets or that Visual Edge will be able to complete any acquisitions.
OUR CURRENT FINANCIAL CONDITION PREVENTS VISUAL EDGE FROM FINANCING AN
ACQUISITION INDEPENDENTLY. Our current financial condition will not allow Visual
Edge to finance an acquisition independently. If Visual Edge locates an
acquisition opportunity, it will have to depend on the profitability of the
target company and the efforts of some of our major stockholders to attract and
obtain financing. We cannot assure you that Visual Edge will be able to obtain
financing on acceptable terms or at all. If we cannot obtain financing, we will
not be able to complete any acquisitions.
THE MARKET PRICE FOR OUR COMMON STOCK IS VOLATILE. Since our initial
public offering, the market prices of our publicly traded securities have been
highly volatile as has been the case with the securities of other emerging
companies. The market price of our common stock may be affected by certain
factors such as our operating results and press releases or those of our
competitors. In addition, in recent years, the stock market has experienced a
high level of price and volume volatility and market prices for the securities
of many companies have experienced wide price fluctuations which have not
necessarily been related to the operating performance of those companies.
OUR INVESTMENTS MAY INCUR LOSSES AND MAY NOT HAVE ANY FUTURE PROFITS.
Companies into which Visual Edge makes investments may have operating losses. As
start-up companies, these businesses may continue to incur significant increases
in expenses. These increases may adversely impact our business and their
financial condition.
OUR MARKET IS RAPIDLY EVOLVING. The market for Internet-based and other
technology products and services is rapidly evolving and is speculative in
nature. The demand and market acceptance for our products and services and the
products and services of companies into which we may invest are subject to a
high level of uncertainty and risk. Our business prospects, and the prospects of
companies into which we invest, must be considered in light of the risks,
expenses and difficulties frequently encountered by companies in the new and
rapidly evolving market for Internet-based and other technology products and
services. Some of the risks include the ability to design, build, operate and
expand technology; create awareness of brand, products and services; obtain
strategic relationships and alliances; effectively compete with existing and
unforeseen competitors; and develop products and services to meet the evolving
needs of customers.
WE HAVE AN UNPROVEN BUSINESS MODEL. Our ability to generate revenues
depends upon whether we can generate revenues from our operations and invest in
or establish strategic relationships with operating companies to provide us with
an adequate revenue stream. If we cannot achieve or sustain an adequate revenue
stream or if our products and services, or the products and services of
companies in which we invest, do not achieve or sustain broad market acceptance,
our business, operating results and financial condition will be materially
adversely affected. Our ability to generate future revenues depends on a number
of factors, many of which are beyond our control, including among other things,
the risk factors described in this Report. Therefore, we are unable to forecast
our revenues with any degree of accuracy.
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<PAGE> 15
WE MAY HAVE FUTURE CAPITAL NEEDS AND MAY NOT BE ABLE TO OBTAIN SUITABLE
FINANCING. Due to our limited operating history and the nature of the Internet
and other technology-related industries, our future capital needs are difficult
to predict. We may require additional capital to fund any of the following:
o advertising, maintenance and expansion
o sales, marketing, research and development
o unanticipated opportunities
o operating losses from changing business conditions
o operating losses from unanticipated competitive pressures
o new venture capital investments
o strategic alliances
We cannot assure our investors that adequate levels of additional
financing will be available at all or on acceptable terms. Any additional
financing could result in significant dilution to our existing stockholders. If
we are unable to raise additional capital, our growth and development could be
impeded. If we do not have sufficient capital, we may not be able to take
advantage of growth opportunities, respond to competitive pressures or pursue
our business plan. Our failure to have sufficient capital could have a material
adverse effect on our business, operating results and financial condition.
OUR SUBSIDIARIES ARE NOT, AND IN THE FUTURE MAY NOT BE, WHOLLY-OWNED.
Upon closing of our proposed investment, we expect to hold approximately 10% of
the outstanding capital stock of Hencie on a fully diluted basis. We may not be
able to direct its management and policies, or those of other companies into
which we invest in the future. Although we expect under the provisions of the
executed term sheet to have representation on the board of Hencie, no assurance
can be given that our representatives will be able to influence its future
direction in a manner which results in increased value to us through our
minority ownership interest.
IF WE FAIL TO MANAGE OUR GROWTH AND INTEGRATE OUR ACQUIRED BUSINESSES,
OUR BUSINESS WILL BE ADVERSELY AFFECTED. If the reorganization discussed in this
Report results in significant growth of our operations, we will be required to
implement and improve our operating and financial systems and controls, and to
expand, train and manage our employee base to manage this growth. We will be
dependent upon our management to assume and perform the management functions
formerly performed by management of each of the parties to the reorganization.
To the extent that our management is unable to assume or perform these combined
duties, our business, results of operations and financial condition could be
adversely affected. There can be no assurance that the management, systems and
controls currently in place or any steps taken to improve such management,
systems and controls will be adequate in the future. In addition, the
integration of the acquired entities and their operations will require our
management to make and implement a number of strategic operational decisions.
The timing and manner of the implementation of these decisions will materially
impact our business operations.
WE MUST RECRUIT AND RETAIN KEY MANAGEMENT AND TECHNICAL PERSONNEL TO BE
COMPETITIVE. Our success depends to a significant extent on the continued
contributions, experience and knowledge of our senior management team and key
technical and marketing personnel. Our success also depends upon our ability to
identify, attract, hire, train, retain and motivate highly skilled technical,
managerial, sales and marketing personnel. No assurance can be given that we
will be able to successfully attract, assimilate or retain a sufficient number
of qualified personnel. The failure to do so could have a material adverse
effect on our business, results of operation and financial condition.
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<PAGE> 16
WE OPERATE IN AN INDUSTRY WITH EVOLVING TECHNOLOGY TRENDS AND INDUSTRY
STANDARDS. Our success, in part, depends upon our ability, as well as the
ability of companies into which we invest, to develop and provide new products
and services that meet customers' changing requirements. The Internet and
technology-related industries have been characterized by significant
technological changes, frequent new system and product enhancements, evolving
industry standards and changes in customer needs that have had and will continue
to have a significant impact on the industries and their participants. New
technologies and standards could render existing systems obsolete and ultimately
result in lost revenues. Our future success, as well as the success of companies
into which we invest, will depend, in part, on the ability to effectively use
leading technologies, continue to develop technological expertise, enhance
currently planned products and services, develop and implement new products and
services that meet changing customer needs, anticipate changes and influence and
respond to emerging industry standards and other technological changes on a
timely and cost effective basis. No assurance can be made that we, or the
companies into which we invest, will keep pace with ever-changing technological
trends and evolving industry standards.
INFINITY AND ITS AFFILIATES EXERCISE, AND IN THE FUTURE E3 MAY
EXERCISE, CONTROL OVER VISUAL EDGE AND MAY HAVE CONFLICTS OF INTEREST. Infinity
and its affiliates own a sufficient amount of our common stock to exercise
significant control over our business, policies and affairs and, in general,
determine the outcome of any corporate transaction or other matters submitted to
the stockholders for approval, all in a manner that could conflict with the
interests of other stockholders. Upon the transfer of shares of common stock
from Infinity to E3, as discussed above, E3 may exercise significant control
over our business, policies and affairs and, in general, determine the outcome
of any corporate transaction or other matters submitted to the stockholders for
approval, all in a manner that could conflict with the interests of other
stockholders
WE MAY BECOME SUBJECT TO INCREASED GOVERNMENTAL OVERSIGHT. There can be
no assurance that Internet and technology-related products and services which
are sold by us or the companies into which we invest will not be actively
regulated. Increased regulation of the Internet and technology-related products
and services may slow our growth, particularly if other countries also impose
similar regulations. Any regulation may negatively impact our cost of doing
business and may materially adversely affect our business, financial condition,
operating results and future prospects. Increased regulation in one or more
countries could materially adversely affect our business, financial condition,
operating results and prospects.
WE DO NOT PLAN TO PAY DIVIDENDS ON OUR CAPITAL STOCK. We do not expect
to pay dividends on our common stock in the foreseeable future. We anticipate
that we will retain any earnings used in the development of new products or
services, investments or the expansion of business operations. There can be no
assurance that we will ever recognize a gain from our business operations or pay
a dividend on our capital stock.
THE SHARES ELIGIBLE FOR FUTURE SALE MAY DECREASE THE PRICE OF OUR
COMMON STOCK. If our stockholders sell substantial amounts of their common stock
in the public market, including shares issued upon the exercise of outstanding
options, then the market price of our common stock could fall. Restrictions
under the securities laws may limit the number of shares of common stock
available for sale in the public market.
OUR RIGHT TO ISSUE PREFERRED STOCK AND ANTI-TAKEOVER PROVISIONS UNDER
DELAWARE LAW COULD MAKE A THIRD PARTY ACQUISITION OF US DIFFICULT. Our
certificate of incorporation provides that our board of directors may issue
preferred stock without stockholder approval. The issuance of preferred stock
could make it more difficult for a third party to acquire us without the
approval of Visual Edge's board. Additionally, Delaware corporate law imposes
certain restrictions on corporate control transactions that could make it more
difficult for a third party to acquire us without the approval of our board.
OUR COMMON STOCK HAS A LIMITED TRADING HISTORY AND AN ILLIQUID MARKET.
There has only been a limited public market for our common stock. We cannot
predict the extent to which an active trading market will develop or how liquid
that market might become. The price of our common stock issued in the
reorganization may not be indicative of prices that will prevail in the trading
market.
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
PROCEEDINGS WITH STOCKHOLDERS
On August 2, 1999, Infinity filed suit in Delaware Chancery Court
against Visual Edge and three of our then-current officers and directors, Earl
Takefman, Richard Parker, and Thomas Peters (Infinity Investors Limited v. Earl
T. Takefman, et al.; Civil Action No. 17347-NC, in the Court of Chancery of the
State of Delaware in and for New Castle County). In its original complaint in
that action, Infinity sought, among other things, injunctive relief to prevent
the defendants from interfering with Infinity's rights to convert preferred
stock to common stock, as well as from interfering with the subsequent removal
of Messrs. Takefman, Parker and Peters as directors and officers of Visual Edge.
The original complaint also disclosed Infinity's intention to convert certain
shares of our convertible preferred stock into approximately 9.6 million shares
of our common stock. Infinity asserts that an event of default under Infinity's
securities purchase agreement with Visual Edge occurred when our common stock
was delisted from the Nasdaq SmallCap Market and a listing on a comparable
market or exchange was not obtained within the applicable period. Infinity
further asserted that the occurrence of such an event provided it with the
aforementioned conversion rights.
On August 13, 1999, Infinity delivered a notice of conversion to Visual
Edge to convert 1,627 of its 4,400 shares of our Series A-2 Convertible
Preferred Stock into 9,594,857 shares of our common stock. Also on August 13,
1999, Infinity dismissed Visual Edge from the Delaware lawsuit.
On August 30, 1999, Infinity delivered a stockholders' consent to
Visual Edge, pursuant to which Messrs. Parker, Peters and Takefman were
allegedly removed from our board of directors, and Stuart J. Chasanoff and J.
Keith Benedict, affiliates of Infinity, were appointed as directors. On the same
date, the newly appointed board of directors caused a unanimous written consent
to be delivered to Visual Edge, pursuant to which, among other things, Mr.
Takefman was removed from his position as Chief Executive Officer, Mr. Parker
was removed from his position as President and Chief Operating officer, and Mr.
Peters was removed from his position as Vice President of Operations and
Technology.
On September 13, 1999, the Series A-2 preferred stockholders of Visual
Edge appointed John A. Wagner to our board, exercising their rights under the
applicable Certificate of Designation to appoint a representative to our board
of directors. To the extent that the alleged unanimous board consent of August
30, 1999 did not terminate Messrs. Takefman and Parker from their offices, our
board of directors held a meeting on September 14, 1999 and removed Messrs.
Takefman and Parker from their positions with Visual Edge. By letters dated
September 21, 1999, Messrs. Takefman and Parker resigned from our board of
directors effective immediately.
On November 5, 1999, Takefman and Parker filed a motion to dismiss
Infinity's Delaware action. By memorandum opinion issued January 28, 2000, the
Delaware Chancery Court granted that motion in part and denied it in part,
holding that Infinity could continue to pursue its claims against those two
individuals for tortious interference and for breach of their fiduciary duties
of care and loyalty with respect to their alleged interference with Infinity's
stock conversion and their alleged failure to disclose their intent to take
control of the Visual Edge board of directors. The Delaware court also held that
Takefman and Parker necessarily conceded the validity of Infinity's conversion
and their subsequent removal from Visual Edge's board of directors.
In June 2000, the board of directors of Visual Edge recognized the
conversion by Infinity of 1,627 shares of Series A-2 Convertible Preferred of
the Company into 9,594,857 shares of common stock effective as of August 13,
1999.
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<PAGE> 18
PROCEEDINGS WITH FORMER OFFICERS AND DIRECTORS
On September 23, 1999, Messrs. Takefman and Parker filed suit in
Florida state court against Visual Edge, Infinity, HW Partners, L.P., Clark
Hunt, Barrett Wissman, John Wagner, Stuart Chasanoff and Keith Benedict (Earl
Takefman, et al. v. Visual Edge System, Inc., et al., Case No. CL 99-9086 AG, in
the Circuit Court of the Fifteenth Judicial Circuit in and for Palm Beach
County, Florida). Messrs. Takefman and Parker allege that they are owed
severance payments pursuant to their respective employment agreements with
Visual Edge, and assert claims for breach of contract, tortious interference
with contract and interference with employment. Visual Edge believes Takefman's
and Parker's claims are without merit and intends to vigorously defend itself
against those claims.
On October 12, 1999, Visual Edge filed suit in Delaware Chancery Court
against Messrs. Takefman and Parker for, among other things, breach of fiduciary
duty, breach of employment agreements and tortious interference with contract
(Visual Edge Systems Inc. v. Earl T. Takefman, et al.; Civil Action No.
17472-NC, in the Court of Chancery of the State of Delaware in and for New
Castle County). On November 5, 1999, Messrs. Takefman and Parker moved to
dismiss the action or to stay the action in favor of the Florida suit. On
January 31, 2000, the Delaware court granted the motion to stay until further
order of that court. As a result, Visual Edge intends to assert its claims
against Takefman and Parker as counterclaims in the prior-filed Florida action,
which is described in the immediately preceding paragraph.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Visual Edge has outstanding $1,500,000 face amount of Convertible Notes
held by Infinity, Summit Capital Limited and Glacier Capital Limited. Interest
an the Convertible Notes is payable quarterly. Visual Edge has not paid interest
owed on Visual Edge's outstanding Convertible Notes since March 31, 1999. As of
June 30, 2000, the amount of unpaid accrued interest on the Convertible Notes
was approximately $343,892. The non-payment of such interest constitutes an
event of default under the Convertible Notes and related agreements. As of the
date of this filing, the holders of the Convertible Notes have neither declared
a default nor given notice of acceleration of the amounts owed under the
Convertible Notes or the taking of any other recourse with respect to the
default.
In addition, on June 30, 2000 Visual Edge was obligated to pay a
dividend to the holders of its Series A-2 Convertible Preferred Stock. The
amount of this dividend is $393,570 as of June 30, 2000, which has not been
distributed. The non-payment of these dividends constitutes an event of default
under the terms of the Series A-2
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<PAGE> 19
Convertible Preferred Stock as of the date of this filing, the holders of the
Series A-2 Convertible Preferred Stock have not declared a default or given
notice of the exercise of any other remedy under the terms of the Series A-2
Convertible Preferred Stock.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
In July 2000, Visual Edge sent to its stockholders a Consent
Solicitation Statement pertaining to various corporate action. In August 2000,
holders of shares of Visual Edge's common stock, which in each case constituted
a majority of the issued and outstanding shares of common stock of Visual Edge,
consented to the following corporate actions:
(1) the election of Thomas Peters, J. Keith Benedict and John
Wagner to serve as members of Visual Edge's Board of Directors
until the next annual meeting of stockholders and until their
respective successors are elected and qualified:
<TABLE>
<CAPTION>
Consents Cast Against or Abstention
Directors Consents Cast in Favor Withheld Non-Vote
--------- ---------------------- ------------------------ ----------
<S> <C> <C> <C> <C>
Thomas Peters 10,438,745 -- --
J. Keith Benedict 10,438,745 -- --
John Wagner 10,438,745 -- --
</TABLE>
(2) the amendment of Visual Edge's Certificate of Incorporation to
change our name from Visual Edge Systems Inc. to Edge
Technology Group, Inc.:
<TABLE>
<CAPTION>
Consents Cast Against or Abstention
Consents Cast in Favor Withheld Non-Vote
---------------------- ------------------------ ----------
<S> <C> <C> <C>
10,438,745 -- --
</TABLE>
(3) the amendment of Visual Edge's Certificate of Incorporation to
increase the authorized number of shares of common stock from
20,000,000 to 90,000,000:
<TABLE>
<CAPTION>
Consents Cast Against or Abstention
Consents Cast in Favor Withheld Non-Vote
---------------------- --------------------- ----------
<S> <C> <C> <C>
10,438,595 2,150 2,000
</TABLE>
(4) the amendment to Visual Edge's Certificate of Incorporation
relating to its Series A-2 Convertible Preferred Stock, which
would entitle Visual Edge , at its option, to amend the
conversion price of the Series A-2 Convertible Preferred Stock
as described above under "Recent Developments":
<TABLE>
<CAPTION>
Consents Cast Against or Abstention
Consents Cast in Favor Withheld Non-Vote
---------------------- ------------------------ ----------
<S> <C> <C> <C>
10,434,595 500 2,650
</TABLE>
(5) the amendment of Visual Edge's Amended and Restated 1996 Stock
Option Plan to (i) increase the total number of shares of
common stock reserved for issuance under the stock option plan
to 4,000,000, (ii) increase the maximum number of options that
can be granted to an employee under the stock option plan in a
single year from 250,000 to 2,000,000, and (iii) authorize the
Board of Directors or the committee administering the stock
option plan to determine and designate option awards to
non-employee directors:
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<PAGE> 20
<TABLE>
<CAPTION>
Consents Cast Against or Abstention
Consents Cast in Favor Withheld Non-Vote
---------------------- ------------------------ ----------
<S> <C> <C> <C>
10,435,595 2,700 450
</TABLE>
(6) the adoption of a plan of internal restructuring to transfer
some or substantially all of Visual Edge's operations to
directly or indirectly wholly-owned subsidiaries, with the
result that Visual Edge would become a holding company:
<TABLE>
<CAPTION>
Consents Cast Against or Abstention
Consents Cast in Favor Withheld Non-Vote
---------------------- ------------------------ ----------
<S> <C> <C> <C>
10,437,795 500 450
</TABLE>
(7) the amendment of Visual Edge's Certificate of Incorporation to
effect a reverse stock split of Visual Edge's common stock to
combine four (4) outstanding shares of common stock into one
(1) share of common stock.
<TABLE>
<CAPTION>
Consents Cast Against or Abstention
Consents Cast in Favor Withheld Non-Vote
---------------------- ------------------------ ----------
<S> <C> <C> <C>
10,434,290 4,455 --
</TABLE>
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
3.1 -- Certificate of Incorporation of Visual Edge, 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 Visual Edge
(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)
3.3 -- Certificate of Designation for Series A-2 Convertible
Preferred Stock (Incorporated by reference to Exhibit
A to the Third Amendment to Bridge Securities
Purchase Agreement and Related Documents, dated as of
December 29, 1998, among Visual Edge, Infinity
Investors Limited, IEO Holdings Limited (as the
transferee from Infinity Emerging Opportunities
Limited), Summit Capital Limited (as the transferee
of Sandera Partners, L.P.) and Glacier Capital
Limited (as the transferee of Lion Capital Partners,
L.P.), which is filed as Exhibit 99.1 to the
Registrant's Current Report on Form 8-K filed January
8, 1999)
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)
20
<PAGE> 21
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 an Form SB-2 (Registration No. 333-5193)
effective July 24, 1996)
4.3 -- Form of Warrant Agreement between Visual Edge and
Whale Securities Co., L.P. (Incorporated by reference
to Exhibit 4.2 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, Visual Edge 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)
4.5 -- Form of Warrant Certificate issued to investors in
the March 1997 Bridge Financing (Incorporated by
reference to Exhibit 4.5 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 Infinity 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
Infinity 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 Infinity 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)
10.1 -- License Agreement, dated March 1, 1995, between Great
White Shark Enterprises, Inc. and Visual Edge, 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 -- Amendment to License Agreement, dated as of June 3,
1997, by and among Visual Edge, Greg Norman and Great
White Shark Enterprises, Inc. (Incorporated by
reference to Exhibit 99.1 to the Registrant's Current
Report on Form 8-K/A filed June 27, 1997)
10.3 -- Amendment to License Agreement, dated as of January
1, 2000, by and among Visual Edge, Greg Norman and
Great White Shark Enterprises, Inc. (Incorporated by
reference to Form 10-K for fiscal year ended December
31, 1999 filed on April 14, 2000)
10.4 -- Employment Agreement, dated as of may 1, 1996,
between Thomas S. Peters and Visual Edge, as amended
(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)
10.5 -- Amended and Restated 1996 Stock Option Plan
(Incorporated by reference to our 1996 definitive
Proxy Statement filed on April 7, 1997)
21
<PAGE> 22
10.6 -- Lease Agreement by and between Fairfax Boca 92, L.P.,
a Georgia limited partnership, and Visual Edge for
offices located at 901 Yamato Road, Boca Raton,
Florida (Incorporated by reference to Form 10-K for
fiscal year ended December 31, 1999 filed on April
14, 2000)
10.7 -- Assignment, dated April 19, 1996 from Thomas S.
Peters to Visual Edge (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)
10.8 -- Share and Warrant Purchase Agreement, dated as of
February 27, 1997, between Visual Edge and Status-One
Investments Inc. (Incorporated by reference to
Exhibit 10.11 to the Registrant's Registration
Statement on Form SB-2 (Registration No. 333-24675)
filed April 7, 1997)
10.9 -- Bridge Securities Purchase Agreement, dated as of
June 13, 1997, among Visual Edge and Infinity
Investors Limited, Infinity Emerging opportunities
Limited, Sandera Partners, L.P. and Lion Capital
Partners, L.P. (collectively with their transferees,
the "Funds") (Incorporated by reference to Exhibit
99.1 to the Registrant's Current Report on Form 8-K
filed June 23, 1997)
10.10 -- Registration Rights Agreement, dated as of June 13,
1997, among Visual Edge and the Funds (Incorporated
by reference to Exhibit 99.2 to the Registrant's
Current Report on Form 8-K filed June 23, 1997)
10.11 -- Transfer Agent Agreement, dated as of June 13, 1997,
among Visual Edge, the Funds and American Stock
Transfer & Trust Company (Incorporated by reference
to Exhibit 99.3 to our Report on Form 8-K filed June
23, 1997)
10.12 -- Purchase Agreement, dated as of March 27, 1998, among
Visual Edge and Marion Interglobal, Ltd.
(Incorporated by reference to Exhibit 10.16 to the
Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1997)
10.13 -- Registration Rights Agreement, dated as of March 27,
1998, among Visual Edge and Marion Interglobal, Ltd.
(Incorporated by reference to Exhibit 10.17 to the
Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1997)
10.14 -- First Amendment to Bridge Securities Purchase
Agreement and Related Documents, dated as of December
31, 1997, among Visual Edge and the Funds
(Incorporated by reference to Exhibit 99.1 to the
Registrant's Current Report on Form 8-K filed
February 9, 1998)
10.15 -- Second Amendment to Bridge Securities Purchase
Agreement and Related Documents, dated as of March
27, 1998, among Visual Edge, Infinity Investors
Limited, Infinity Emerging opportunities Limited,
Summit Capital Limited (as the transferee of Sandera
Partners, L.P.) and Glacier Capital Limited (as the
transferee of Lion Capital Partners, L.P.)
(Incorporated by reference to Exhibit 10.18 to the
Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1997)
10.16 -- Third Amendment to Bridge Securities Purchase
Agreement and Related Documents, dated as of December
29, 1998, among Visual Edge, Infinity Investors
Limited, IEO Holdings Limited (as the transferee from
Infinity Emerging Opportunities Limited), Summit
Capital Limited (as the transferee of Sandera
Partners, L.P.) and Glacier Capital Limited (as the
transferee of Lion Capital Partners, L.P.)
(Incorporated by reference to Exhibit 99.1 to the
Registrant's Current Report on Form S-K filed January
8, 1999)
22
<PAGE> 23
10.17 -- Security Agreement, dated February 6, 1998, between
the Company and HW Partners, L.P., as agent for and
representative of the Funds (Incorporated by
reference to Exhibit 99.2 to the Registrant's Current
Report on Form 8-K filed February 9, 1998)
10.18 -- Form of Warrant Certificate (Incorporated by
reference to Exhibit 99.3 to the Registrant's Current
Report on Form 8-K filed February 9, 1998)
10.19 -- Amendment, dated as of December 31, 1998, to License
Agreement dated as of March 1, 1995, by and between
Greg Norman and Great White Shark Enterprises, Inc.
and Visual Edge, as amended on April 19, 1996,
October 18, 1996 and June 3, 1997 (Incorporated by
reference to Exhibit 10.19 to the Registrant's Annual
Report on Form 10-KSB for the fiscal year ended
December 31, 1998)
10.21 -- Sublease Agreement, dated as of September 29, 1999,
by and between Visual Edge and Sensormatic
Electronics Corporation (Incorporated by reference to
Form 10-K for fiscal year ended December 31, 2000
filed on April 14, 2000)
10.22 -- Fourth Amendment to Bridge Securities Purchase
Agreement and Related Documents, dated as of July 13,
2000 (Incorporated by reference to Exhibit 99.1 to
the Registrant's Current Report on Form 8-K filed
July 17, 2000)
27* -- Financial Data Schedule
----------
* Filed herewith
(b) Exhibits and Reports on Form 8-K
(1) Visual Edge filed a Form 8-K on June 23, 2000,
announcing Visual Edge's recognition of the
conversion of 1,627 shares of Series A-2 Convertible
Preferred Stock into 9,594,857 shares of common
stock, resulting in Infinity Investors Limited, IED
Holdings Limited, Glacier Capital Limited and Summit
Capital Limited owning an aggregate of 49.5% of
Visual Edge's outstanding common stock, and the
resignation of Arthur Andersen LLP as Visual Edge's
certified public accountants.
(2) Visual Edge filed a Form 8-K on July 17, 2000,
announcing our plans to reorganize our operations;
the signing of the Fourth Amendment to the Bridge
Securities Purchase Agreement and Related Documents,
whereby holders of Convertible Securities agreed,
upon satisfaction of certain conditions, not to
convert their Convertible Securities before August 9,
2000; our intent to invest in Hencie, Inc., change
our name to Edge Technology Group, Inc. and effect a
four for one reverse stock split; and the resignation
of Ronald F. Seale, our former Chairman of the Board,
Chief Executive Officer and President.
SIGNATURE
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.
August 21, 2000 By: /s/ Thomas Peters
-------------------------------------------
Thomas Peters
Chief Executive Officer and President
(Principal Executive Officer and Principal
Financial Officer)
23
<PAGE> 24
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
<S> <C> <C>
3.1 -- Certificate of Incorporation of Visual Edge, 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 Visual Edge
(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)
3.3 -- Certificate of Designation for Series A-2 Convertible
Preferred Stock (Incorporated by reference to Exhibit
A to the Third Amendment to Bridge Securities
Purchase Agreement and Related Documents, dated as of
December 29, 1998, among Visual Edge, Infinity
Investors Limited, IEO Holdings Limited (as the
transferee from Infinity Emerging Opportunities
Limited), Summit Capital Limited (as the transferee
of Sandera Partners, L.P.) and Glacier Capital
Limited (as the transferee of Lion Capital Partners,
L.P.), which is filed as Exhibit 99.1 to the
Registrant's Current Report on Form 8-K filed January
8, 1999)
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 an Form SB-2 (Registration No. 333-5193)
effective July 24, 1996)
4.3 -- Form of Warrant Agreement between Visual Edge and
Whale Securities Co., L.P. (Incorporated by reference
to Exhibit 4.2 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, Visual Edge 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)
4.5 -- Form of Warrant Certificate issued to investors in
the March 1997 Bridge Financing (Incorporated by
reference to Exhibit 4.5 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 Infinity 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
Infinity 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)
</TABLE>
<PAGE> 25
<TABLE>
<S> <C> <C>
4.9 -- Form of Common Stock Purchase Warrant issued to
investors in the Infinity 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)
10.1 -- License Agreement, dated March 1, 1995, between Great
White Shark Enterprises, Inc. and Visual Edge, 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 -- Amendment to License Agreement, dated as of June 3,
1997, by and among Visual Edge, Greg Norman and Great
White Shark Enterprises, Inc. (Incorporated by
reference to Exhibit 99.1 to the Registrant's Current
Report on Form 8-K/A filed June 27, 1997)
10.3 -- Amendment to License Agreement, dated as of January
1, 2000, by and among Visual Edge, Greg Norman and
Great White Shark Enterprises, Inc. (Incorporated by
reference to Form 10-K for fiscal year ended December
31, 1999 filed on April 14, 2000)
10.4 -- Employment Agreement, dated as of may 1, 1996,
between Thomas S. Peters and Visual Edge, as amended
(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)
10.5 -- Amended and Restated 1996 Stock Option Plan
(Incorporated by reference to our 1996 definitive
Proxy Statement filed on April 7, 1997)
10.6 -- Lease Agreement by and between Fairfax Boca 92, L.P.,
a Georgia limited partnership, and Visual Edge for
offices located at 901 Yamato Road, Boca Raton,
Florida (Incorporated by reference to Form 10-K for
fiscal year ended December 31, 1999 filed on April
14, 2000)
10.7 -- Assignment, dated April 19, 1996 from Thomas S.
Peters to Visual Edge (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)
10.8 -- Share and Warrant Purchase Agreement, dated as of
February 27, 1997, between Visual Edge and Status-One
Investments Inc. (Incorporated by reference to
Exhibit 10.11 to the Registrant's Registration
Statement on Form SB-2 (Registration No. 333-24675)
filed April 7, 1997)
10.9 -- Bridge Securities Purchase Agreement, dated as of
June 13, 1997, among Visual Edge and Infinity
Investors Limited, Infinity Emerging opportunities
Limited, Sandera Partners, L.P. and Lion Capital
Partners, L.P. (collectively with their transferees,
the "Funds") (Incorporated by reference to Exhibit
99.1 to the Registrant's Current Report on Form 8-K
filed June 23, 1997)
10.10 -- Registration Rights Agreement, dated as of June 13,
1997, among Visual Edge and the Funds (Incorporated
by reference to Exhibit 99.2 to the Registrant's
Current Report on Form 8-K filed June 23, 1997)
10.11 -- Transfer Agent Agreement, dated as of June 13, 1997,
among Visual Edge, the Funds and American Stock
Transfer & Trust Company (Incorporated by reference
to Exhibit 99.3 to our Report on Form 8-K filed June
23, 1997)
10.12 -- Purchase Agreement, dated as of March 27, 1998, among
Visual Edge and Marion Interglobal, Ltd.
(Incorporated by reference to Exhibit 10.16 to the
Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1997)
</TABLE>
<PAGE> 26
<TABLE>
<S> <C> <C>
10.13 -- Registration Rights Agreement, dated as of March 27,
1998, among Visual Edge and Marion Interglobal, Ltd.
(Incorporated by reference to Exhibit 10.17 to the
Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1997)
10.14 -- First Amendment to Bridge Securities Purchase
Agreement and Related Documents, dated as of December
31, 1997, among Visual Edge and the Funds
(Incorporated by reference to Exhibit 99.1 to the
Registrant's Current Report on Form 8-K filed
February 9, 1998)
10.15 -- Second Amendment to Bridge Securities Purchase
Agreement and Related Documents, dated as of March
27, 1998, among Visual Edge, Infinity Investors
Limited, Infinity Emerging opportunities Limited,
Summit Capital Limited (as the transferee of Sandera
Partners, L.P.) and Glacier Capital Limited (as the
transferee of Lion Capital Partners, L.P.)
(Incorporated by reference to Exhibit 10.18 to the
Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1997)
10.16 -- Third Amendment to Bridge Securities Purchase
Agreement and Related Documents, dated as of December
29, 1998, among Visual Edge, Infinity Investors
Limited, IEO Holdings Limited (as the transferee from
Infinity Emerging Opportunities Limited), Summit
Capital Limited (as the transferee of Sandera
Partners, L.P.) and Glacier Capital Limited (as the
transferee of Lion Capital Partners, L.P.)
(Incorporated by reference to Exhibit 99.1 to the
Registrant's Current Report on Form S-K filed January
8, 1999)
10.17 -- Security Agreement, dated February 6, 1998, between
the Company and HW Partners, L.P., as agent for and
representative of the Funds (Incorporated by
reference to Exhibit 99.2 to the Registrant's Current
Report on Form 8-K filed February 9, 1998)
10.18 -- Form of Warrant Certificate (Incorporated by
reference to Exhibit 99.3 to the Registrant's Current
Report on Form 8-K filed February 9, 1998)
10.19 -- Amendment, dated as of December 31, 1998, to License
Agreement dated as of March 1, 1995, by and between
Greg Norman and Great White Shark Enterprises, Inc.
and Visual Edge, as amended on April 19, 1996,
October 18, 1996 and June 3, 1997 (Incorporated by
reference to Exhibit 10.19 to the Registrant's Annual
Report on Form 10-KSB for the fiscal year ended
December 31, 1998)
10.21 -- Sublease Agreement, dated as of September 29, 1999,
by and between Visual Edge and Sensormatic
Electronics Corporation (Incorporated by reference to
Form 10-K for fiscal year ended December 31, 2000
filed on April 14, 2000)
10.22 -- Fourth Amendment to Bridge Securities Purchase
Agreement and Related Documents, dated as of July 13,
2000 (Incorporated by reference to Exhibit 99.1 to
the Registrant's Current Report on Form 8-K filed
July 17, 2000)
27* -- Financial Data Schedule
</TABLE>
----------
* Filed herewith
