<PAGE> 1
Pursuant to Rule 424(b)(3)
Registration No. 333-30597
PROSPECTUS
1,521,636 SHARES
VSI ENTERPRISES, INC.
COMMON STOCK
The 1,521,636 shares of Common Stock (the "Common Stock") of VSI
Enterprises, Inc. (the "Company") offered hereby are being sold by certain
holders of the Common Stock of the Company named herein under "Selling
Shareholders." Unless the context otherwise requires, the holders of the Common
Stock selling shares hereunder are hereinafter collectively referred to as the
"Selling Shareholders." The Company will not receive any proceeds from the sale
of the Common Stock by the Selling Shareholders. See "Selling Shareholders,"
"Plan of Distribution" and "Use of Proceeds."
The Common Stock is traded on the Nasdaq SmallCap Market under the
symbol "VSIN" and on the Boston Stock Exchange under the symbol "VSI." On July
31, 1997, the last reported sale price for the Common Stock, as reported on the
Nasdaq SmallCap Market, was $1.31 per share.
SEE "RISK FACTORS" ON PAGES 5 TO 8 FOR A DISCUSSION OF CERTAIN FACTORS THAT
SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE
COMMON STOCK OFFERED HEREBY.
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.
<TABLE>
<CAPTION>
==========================================================================================================================
OFFERING UNDERWRITING PROCEEDS TO PROCEEDS
PRICE TO DISCOUNTS AND SELLING TO
PUBLIC COMMISSIONS SHAREHOLDERS COMPANY
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Share ................................... See Text See Text See Text See Text
Total ....................................... Below Below Below Below
==========================================================================================================================
</TABLE>
The Selling Shareholders have advised the Company that they may elect
to offer for sale and to sell the Common Stock from time to time in one or more
transactions through brokers in the over-the-counter market, in private
transactions, or otherwise, in each case at market prices then prevailing or
obtainable. Accordingly, sales prices and proceeds to the Selling Shareholders
will depend upon price fluctuations and the manner of sale. The Selling
Shareholders may effect such transactions by selling to or through one or more
broker-dealers, and such broker-dealers may receive compensation in the form of
underwriting discounts, brokerage commissions or similar fees in amounts which
may vary from transaction to transaction. Such brokerage commissions and charges
and the legal fees, if any, will be paid by the Selling Shareholders. The
Company will bear all other expenses in connection with registering the shares
offered hereby, which expenses are estimated to total approximately $15,000. See
"Plan of Distribution."
The date of this Prospectus is August 1, 1997
<PAGE> 2
AVAILABLE INFORMATION
The Company is subject to certain informational requirements of the
Securities Exchange Act of 1934 (the "1934 Act") and, in accordance therewith,
files reports and other information with the Securities and Exchange Commission
(the "Commission"). Such reports and other information can be inspected and
copied at the public reference facilities maintained by the Commission at Room
1024, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the Commission's
regional offices located at Seven World Trade Center, 13th Floor, New York, New
York 10048 and 500 West Madison Street, Chicago, Illinois 60661. Copies of such
material can also be obtained at prescribed rates by writing to the Securities
and Exchange Commission, Public Reference Section, 450 Fifth Street, N.W.,
Washington, D.C. 20549. In addition, the Commission maintains a web site that
contains reports, proxy and information statements and other information
regarding the Company at http://www.sec.gov. Such reports, proxy statements and
other information concerning the Company may also be inspected at the offices of
the National Association of Securities Dealers, Inc., 1735 K Street, N.W.,
Washington, D.C. 20006-1506 and the Boston Stock Exchange, One Boston Place,
Boston, MA 02108.
The Company has filed a Registration Statement on Form S-3 (together
with all amendments and exhibits filed or to be filed in connection therewith,
the "Registration Statement") under the Securities Act of 1933, as amended, with
respect to the Common Stock offered hereby. This Prospectus does not contain all
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 contained herein concerning the provisions of documents are
necessarily summaries of such documents, and each statement is qualified in its
entirety by reference to the copy of the applicable document filed with the
Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed with the Commission pursuant
to the 1934 Act are hereby incorporated in this Prospectus by reference:
1. The Company's Annual Report on Form 10-K for the year ended
December 31, 1996;
2. The Company's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1997;
3. The Company's Current Report on Form 8-K dated January 3,
1997;
4. The description of the Company's Common Stock contained in the
Company's Registration Statement on Form 8-A as filed with the
Commission on November 12, 1991.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14
or 15(d) of the 1934 Act subsequent to the date of this Prospectus 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 respective dates of filing
of such documents. Any statement contained in a document incorporated or deemed
to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any other subsequently filed document which also is or is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified and superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person to whom a
Prospectus is delivered, upon written or oral request of such person, a copy of
any and all of the information that has been incorporated by reference in this
Prospectus (excluding exhibits unless such exhibits are specifically
incorporated by reference into such documents). Please direct such requests to
Investor Relations Department, VSI Enterprises, Inc., 5801 Goshen Springs Road,
Norcross, Georgia 30071, telephone number (770) 242-7566.
-2-
<PAGE> 3
THE COMPANY
GENERAL
VSI Enterprises, Inc. (the "Company"), through its five wholly-owned
subsidiaries, is in the network multimedia/videoconferencing business. The
Company, along with its strategic partners, offers customers turnkey solutions
by supplying videoconferencing products and services, as well as transmission
equipment and a complete internal network, to support video, voice and data
applications. Its core business is the design, manufacture and marketing of
interactive group and desktop videoconferencing systems (the "VSI Systems"). The
VSI Systems may be sold individually, or in conjunction with the Company's
businesses that design, market and install network and transmission technology
products and services. Each VSI System is designed with open software and
modular subsystems which allow a VSI System to be expanded or reconfigured as
technologies, user requirements or new applications evolve. The Company's
products are designed to allow multiple participants at geographically dispersed
sites to see and hear each other on live television and share graphical and
pictorial information using standard commercially available telecommunications
transmission facilities. The Company integrates standard video, audio and
transmission components with its own proprietary video, audio and computer
control components and software.
The Company's open software and modular subsystems streamline
production and allow the product to be tailored to meet customers' specific
needs without the necessity of custom design. The Company's lead product is
marketed under the trade name Omega(TM). Customers are offered a variety of
option packages to fit specific applications. Customers are also offered upgrade
packages that make the Company's new product compatible with older models. To
date, the Company has sold over 1,200 videoconferencing systems to approximately
250 customers, including NationsBank, Duracell, BellSouth, NYNEX and Johnson &
Johnson, as well as various federal and state government departments and
agencies.
The Company was incorporated under the laws of Delaware on September
19, 1988 as Fi-Tek III, Inc. ("Fi-Tek") for the purpose of raising capital and
to seek out business opportunities in which to acquire an interest. On August
21, 1990, the Company acquired 89.01% of the total common stock and common stock
equivalents then issued and outstanding of Videoconferencing Systems, Inc., a
Delaware corporation ("VSI"). VSI was founded in 1985 through the acquisition of
a portion of the assets of a Sprint Corporation videoconferencing subsidiary. In
December 1990, the Company changed its name from Fi-Tek III, Inc. to VSI
Enterprises, Inc. During the first half of 1991, the Company acquired the
remaining additional outstanding shares of common stock of VSI.
On July 31, 1992, the Company acquired substantially all of the
outstanding shares of Common Stock of CyberVision, n.v., a Belgian corporation.
In April 1994, the Company changed the name of CyberVision, n.v. to
Videoconferencing Systems, n.v. (hereinafter referred to as "VSI Europe") to
permit both companies to market products under the common trade name of "VSI."
VSI Europe is a distributor of the Company's videoconference systems in Europe
and has installed videoconference room systems at sites in the United Kingdom,
France, Germany, Belgium, the Netherlands, Luxembourg, Italy, Denmark, Sweden,
Spain, Portugal, Ireland and Switzerland. VSI Europe has offices located in
London and Antwerp.
In April 1995, the Company acquired cR Solutions, a software company
whose products include a reservation system for the management of
videoconferencing systems. This business is being operated by the Company
through its VSI Solutions, Inc. subsidiary ("VSI Solutions").
-3-
<PAGE> 4
On June 28, 1996, the Company acquired Integrated Network Services,
Inc. ("INS"), a company engaged in the design, installation and support of local
and wide area networks, primarily for the healthcare industry. This business
will be operated by the Company through its VSI Network Services, Inc.
subsidiary ("VSINS"). INS is an integration firm specializing in the
connectivity of multi-protocol environments, ranging from small, local area
networks to large, enterprise-wide networks employing WAN technologies to
connect multiple sites.
On October 2, 1996, the Company acquired Eastern Telecom, Inc. ("ETI"),
a company engaged in the business of marketing and sales of telecommunications
services and products. This business will be operated as a wholly-owned
subsidiary of the Company. ETI sells network services such as Centrex, frame
relay and basic rate interface, primary rate interface and ISDN connections on
behalf of a number of major telecommunications providers.
VSI, VSI Europe, VSI Solutions, VSINS and ETI will continue their
respective businesses as operating subsidiaries of the Company. References to
the Company herein refer to VSI Enterprises, Inc., VSI, VSI Europe, VSI
Solutions, VSINS and ETI as a consolidated operation, unless the context
indicates otherwise.
The Company's principal executive offices and manufacturing facilities
are located at 5801 Goshen Springs Road, Norcross, Georgia 30071, and its
telephone number is (770) 242-7566.
RECENT DEVELOPMENTS
On July 15, 1997, Mark E. Munro resigned all his positions with the
Company and its subsidiaries, including his position as a director of the
Company and as the Chief Executive Officer and director of VSI Network
Solutions, Inc., d/b/a Eastern Telecom.
-4-
<PAGE> 5
RISK FACTORS
THE PURCHASE OF THE SECURITIES OFFERED HEREBY INVOLVES SIGNIFICANT
RISKS. PROSPECTIVE INVESTORS SHOULD GIVE CAREFUL ATTENTION TO THE FOLLOWING
STATEMENTS RESPECTING CERTAIN RISKS APPLICABLE TO THE OFFERING.
Dependence upon Subsidiaries. Since the Company's sole business
henceforth is expected to be that of its subsidiaries, the Company is subject to
the risks associated with being wholly dependent upon the performance of its
subsidiaries.
Working Capital Requirements; Need for Additional Financing. The
Company may require additional capital or other financing to finance its
operations and continued growth. The Company may seek additional equity
financing through the sale of securities on a public or a private placement
basis on such terms as are reasonably attainable. There can be no assurance that
the Company will be able to obtain such financing when needed, or that if
obtained, it will be sufficient or on terms and conditions acceptable to the
Company.
No History of Profitability. After eight years of operations, the
Company has not reported any profits for a full year of operations. The Company
incurred net losses of $6,706,894 and $5,340,557 during the years ended December
31, 1996 and 1995, respectively. As a consequence, the Company had an
accumulated deficit of $24,124,509 and $17,417,615 at the end of each of these
periods, respectively. There can be no certainty regarding the Company's ability
to achieve or sustain profitability in the future. Whether or not VSI is able to
operate profitably, the Company may require additional capital to finance its
operations. Management believes that the Company's ability to continue
operations is dependent upon successfully obtaining additional funds through
debt or equity financing to provide working capital and other funds for
operations, and ultimately, the achievement of profitability. There can be no
assurance that the Company will be successful in achieving these goals.
Technological Change and New Products. The market for the Company's
products is characterized by rapidly changing technology, evolving industry
standards and frequent product introductions. Product introductions are
generally characterized by increased functionality and better picture quality at
reduced prices. The introduction of products embodying new technology may render
existing products obsolete and unmarketable. The Company's ability to
successfully develop and introduce on a timely basis new and enhanced products
that embody new technology, and achieve levels of functionality and price
acceptable to the market will be a significant factor in the Company's ability
to grow and to remain competitive. If the Company is unable, for technological
or other reasons, to develop competitive products in a timely manner in response
to changes in the industry, the Company's business and operating results will be
materially and adversely affected.
Integration of Acquired Businesses. An important element of the
Company's growth strategy is to expand through acquisitions. The Company's
future success is dependent upon its ability to finance and effectively
integrate acquired businesses with the Company's operations. Although the
Company believes that it will be able to effect such integration, there can be
no assurance that INS, ETI or future acquisitions will be successfully
integrated or that any such acquisition will otherwise be successful. In
addition, the financial performance of the Company is now and will continue to
be subject to various risks
-5-
<PAGE> 6
associated with the acquisition of businesses, including the financial effects
associated with the integration of such businesses. There can be no assurance
that the Company's acquisition strategy will be successful.
Dependence on Third Parties. Substantially all of the Company's
components, subsystems and assemblies are made by outside vendors. Disruption in
supply, a significant increase in price of one or more of these components or
failure of a third-party supplier to remain competitive in functionality or
price could have a material adverse effect on the Company's business and
operating results. There can be no assurance that the Company will not
experience such problems in the future. Similarly, excessive rework costs
associated with defective components or process errors associated with the
Company's anticipated new product line of videoconferencing systems could
adversely affect the Company's business and operating results.
Foreign Sales and Operations. During fiscal 1996 and fiscal 1995,
revenues from international sales represented approximately 13% of the Company's
net product sales. The Company's profitability and financial condition therefore
will be impacted by the success of these foreign operations. International sales
and operations are subject to inherent risks, including difficulties and delays
in obtaining pricing approvals and reimbursement, unexpected changes in
regulatory requirements, tariffs and other barriers, political instability,
difficulties in staffing and managing foreign operations, longer payment cycles,
greater difficulty in accounts receivable collection and adverse tax
consequences. Currency translation gains and losses on the conversion to United
States dollars from international operations could contribute to fluctuations in
the Company's results of operations. If for any reason exchange or price
controls or other restrictions on the conversion or repatriation of foreign
currencies were imposed, the Company's operating results could be adversely
affected. There can be no assurance that these factors will not have an adverse
impact on the Company's future international sales and operations and,
consequently, on the Company's operating results.
Concentration of Customers. The Company sells videoconferencing systems
to a number of major customers. During fiscal 1996, approximately 14% of the
Company's net product sales were to NYNEX. There can be no assurance that the
loss of this customer will not have an adverse effect on the Company's
operations.
Dependence on Key Employees and Management Growth. The Company's
development, management of its growth and other activities depend on the efforts
of key management and technical employees. Competition for such persons is
intense. The Company uses incentives, including competitive compensation and
stock option plans, to attract and retain well-qualified employees. There can be
no assurance, however, that the Company will continue to attract and retain
personnel with the requisite capabilities and experience. The loss of one or
more of the Company's key management or technical personnel also could adversely
affect the Company. The Company does not have employment agreements with its key
management personnel or technical employees. The Company's future success is
also dependent upon its ability to effectively attract, retain, train, motivate
and manage its employees. Failure to do so could have a material adverse effect
on the Company's business and operating results.
Competition. Competition in the video communications market is intense.
In the videoconferencing market, the Company's primary competitors are
PictureTel Corporation and VTEL Corporation, each of which has greater resources
and market share than those of the Company. The Company expects other
competitors, some with significantly greater technical and financial resources,
to enter the videoconferencing market. If the Company cannot continue to offer
new videoconferencing
-6-
<PAGE> 7
products with improved performance and reduced cost, its competitive position
will erode. Moreover, competitive price reductions may adversely affect the
Company's results of operations.
Fluctuations in Quarterly Performance. The Company's product sales have
historically been derived primarily from the sale of videoconferencing systems
and related equipment, the market for which is still developing. In addition,
the Company's revenues occur predominantly in the third month of each fiscal
quarter. Accordingly, the Company's quarterly results of operations are
difficult to predict, and delays in the closing of sales near the end of the
quarter could cause quarterly revenues and, to a greater degree, operating and
net income to fall substantially short of anticipated levels. The Company's
total revenues and net income levels could also be adversely affected by
cancellations or delays of orders, interruptions or delays in the supply of key
components, changes in customer base or product mix, seasonal patterns of
capital spending by customers, delays in purchase decisions due to new product
announcements by the Company or its competitors, increased competition and
reductions in average selling prices.
No Assurance of Continued Trading Market in Company Securities. The
Company's Common Stock is traded on the Nasdaq SmallCap Market and on the Boston
Stock Exchange. There is no assurance that a public market for the Company's
Common Stock will continue to be made or that persons purchasing the Company's
securities will be able to avail themselves of a public trading market for the
Common Shares in the future.
In order for the Company's Common Stock to be eligible for continued
listing on the Nasdaq SmallCap Market, the Common Stock must, among other
things, have a minimum bid price per share of $1.00; provided, however that the
Company is not required to maintain the $1.00 per share minimum bid price if it
maintains market value of public float of not less than $1 million and capital
and surplus of not less than $2 million. The Company's Common Stock currently is
trading at a price in excess of $1.00 per share and as of March 31, 1997, the
Company had in excess of $2 million in capital and surplus. Net losses in future
periods, however, may result in the Company's capital and surplus falling below
Nasdaq's minimum requirements. There can be no assurance that the Company will
remain in compliance with Nasdaq's continued listing requirements. If the Common
Stock is delisted by Nasdaq, the trading market for the Common Stock will be
adversely affected, as price quotations for the Common Stock will not be as
readily obtainable.
No Dividends. The Company has never paid cash dividends on its Common
Stock and has no plans to pay cash dividends in the foreseeable future. The
policy of the Company's Board of Directors is to retain all available earnings
for use in the operation and expansion of the Company's business.
Possible Issuance of Preferred Stock. The Company is authorized to
issue up to 800,000 shares of Preferred Stock, $.00025 par value (the "Preferred
Stock"). Preferred Stock may be issued in one or more series, the terms of which
may be determined at the time of issuance by the Board of Directors, without
further action by stockholders, and may include voting rights (including the
right to vote as a series on particular matters), preferences as to dividends
and liquidation, conversion and redemption rights and sinking fund provisions.
No Preferred Stock is currently outstanding and the Company has no present plans
for the issuance thereof. The issuance of any Preferred Stock could affect the
rights of the holders of Common Stock, and therefore, reduce the value of the
Common Stock and make it less likely that holders of Common Stock would receive
a premium for the sale of their shares of Common
-7-
<PAGE> 8
Stock. In particular, specific rights granted to future holders of Preferred
Stock could be issued to restrict the Company's ability to merge with or sell
its assets to a third party.
Pending Litigation. On January 3, 1997, two shareholders of the Company
filed a putative class action against the Company and its Chief Executive
Officer in the U.S. District Court for the Northern District of Georgia, Atlanta
Division. The plaintiffs purport to represent a class of all persons (i) who
purchased the common stock of the Company on the open market between October 6,
1995 and January 8, 1996 or (ii) who purchased the common stock of the Company
through the exercise of the Company's Class B Warrants between October 6, 1995
and December 18, 1995. The Complaint alleges that during this interval the
defendants made material misrepresentations and omissions in connection with the
financial condition of the Company which had the effect of artificially
inflating the market price of the Company's common stock. The Complaint alleges
that by virtue of this conduct defendants violated Section 10(b) of the
Securities Exchange Act of 1934 (the "1934 Act") and SEC Rule 10b-5 thereunder.
The Complaint also alleges that defendant Richard K. Snelling was a controlling
person within the meaning of Section 20 of the 1934 Act and is therefore liable
to the plaintiffs on that basis as well. The Complaint seeks compensatory
damages along with pre- and post-judgment interest, reasonable attorneys fees,
expert witness fees and other costs.
The Company and Mr. Snelling deny any liability with respect to these
claims and intend vigorously to defend them. This action is at an early
procedural stage, however, and it is not possible at this time to determine the
outcome of the lawsuit or the effect of its resolution on the Company's
financial position or operating results. Management believes that the Company's
defenses will have merit; there can be no assurance however, that the Company
will be successful in its defense or that this litigation will not have a
material adverse effect on the Company's results of operations for some period
or on the Company's financial position.
USE OF PROCEEDS
The Company will not receive any of the proceeds from the sale of
shares of the Common Stock by the Selling Shareholders. See "Selling
Shareholders" for a list of those persons who will receive the proceeds from
such sales.
-8-
<PAGE> 9
SELLING SHAREHOLDERS
The following table sets forth certain information regarding the
beneficial ownership of the Company's Common Stock as of June 1, 1997 by the
shareholders of the Company who are offering securities pursuant to this
Prospectus (the "Selling Shareholders"). "Beneficial Ownership" includes shares
for which an individual, directly or indirectly, has or shares voting or
investment power or both. All of the listed persons have sole voting and
investment power over the shares listed opposite their names unless otherwise
indicated in the notes below.
<TABLE>
<CAPTION>
BEFORE THE OFFERING AFTER THE OFFERING
------------------------ -------------------------
NUMBER SECURITIES TO NUMBER
NAME OF BENEFICIAL BENEFICIALLY PERCENT BE SOLD BENEFICIALLY PERCENT
OWNER OWNED OF CLASS IN OFFERING OWNED OF CLASS
- ------------------ ------------ -------- ------------- ------------ --------
<S> <C> <C> <C> <C> <C>
Bank von Ernst & CIB.............................. 250,000 * 250,000 0 0
Ken Burke......................................... 105,485 * 105,485 0 0
Larry M. Carr and Sharon R. Carr, JTWROS(1)....... 2,033,479(2) 4.6 124,599 1,908,880(2) 4.3
Michael Daly...................................... 7,117(3) * 7,117 0 0
Sean Dandley...................................... 35,587(3) * 35,587 0 0
David DesJardins.................................. 1,067(3) * 1,067 0 0
Barry Familitto................................... 5,338(3) * 5,338 0 0
Kelly and Jonathan Faville........................ 3,560(3) * 3,560 0 0
Chris Gioffre..................................... 7,117(3) * 7,117 0 0
Frank Hilliard.................................... 114,073 * 52,743 61,600 *
Brett Lincoln..................................... 7,117(3) * 7,117 0 0
James Maloney..................................... 7,117(3) * 7,117 0 0
John McLaughlin................................... 7,117(3) * 7,117 0 0
NRT Contract Manufacturing, Inc................... 180,000 * 100,000 80,000 *
Bruce Pecaro...................................... 90,000 * 60,000 30,000 *
Theodore M. Rains................................. 341,914 * 79,114 262,800 *
Edward S. Redstone(4)............................. 2,919,441(5) 6.6 421,941 2,497,500(5) 5.7
Brian Rowley...................................... 35,587(3) * 35,587 0 0
Smith, Gambrell & Russell, LLP(6)................. 200,000 * 200,000 0 0
Helen Tackett..................................... 1,779(3) * 1,779 0 0
Tim Trowbridge.................................... 1,067(3) * 1,067 0 0
Beth Tulli........................................ 1,067(3) * 1,067 0 0
Reid Wintle....................................... 7,117(3) * 7,117 0 0
</TABLE>
- ------------------
(1) Mr. Carr serves as a director of the Company.
(2) Includes 65,000 shares of Common Stock subject to stock options which
are exercisable within the next sixty days and 250,000 shares of Common
Stock subject to presently exercisable Common Stock Purchase Warrants.
(3) Represents shares of Common Stock issuable upon the exercise of
presently exercisable stock options.
(4) Mr. Redstone serves as a director of the Company.
(5) Includes 35,000 shares of Common Stock subject to stock options which
are exercisable within the next sixty days and 2,500 shares of Common
Stock owned by Mr. Redstone's spouse.
(6) Smith, Gambrell & Russell, LLP serves as the Company's outside legal
counsel. The shares of Common Stock offered hereby were issued to
Smith, Gambrell & Russell, LLP in payment of legal services rendered to
the Company.
-9-
<PAGE> 10
DESCRIPTION OF SECURITIES
The authorized capital stock of the Company consists of 60,000,000
shares of Common Stock of $.00025 par value and 800,000 shares of Preferred
Stock of $.00025 par value, issuable in series, the relative rights and
preferences of which may be designated by the Board of Directors.
COMMON STOCK
Each record holder of Common Stock is entitled to one vote for each
share held on all matters properly submitted to the stockholders for their vote.
Cumulative voting for the election of directors is not permitted by the
Certificate of Incorporation. Holders of outstanding Common Shares are entitled
to those dividends declared by the Board of Directors out of legally available
funds; and, in the event of liquidation, dissolution, or winding up of the
affairs of the Company, holders are entitled to receive, ratably, the net assets
of the Company available to holders of Common Shares after distribution is made
to the preferred stockholders (see "Preferred Stock," below). Holders of
outstanding Common Shares have no preemptive, conversion, or redemptive rights.
All of the issued and outstanding Common Shares are, and all unissued shares
when issued pursuant to the exercise of Warrants will be, duly authorized,
validly issued, fully paid, and nonassessable.
PREFERRED STOCK
The Company is authorized to issue up to 800,000 shares of $.00025 par
value Preferred Stock, none of which is outstanding. The Board of Directors has
the power, without further action by the stockholders, to divide any and all
shares of Preferred Stock into series and to fix and determine the relative
rights and preferences of the Preferred Stock, such as the designation of series
and the number of shares constituting such series, dividend rights, redemption
and sinking fund provisions, liquidating and dissolution preferences, conversion
or exchange rights and voting rights, if any. Issuances of Preferred Stock by
the Board of Directors may result in such shares having senior dividend and/or
liquidation preferences to the holders of shares of Common Stock and may dilute
the voting rights of such holders. Issuances of Preferred Stock, while providing
desirable flexibility in connection with possible acquisitions and other
corporate purposes, could, among other things, adversely affect the voting
rights of holders of the Common Stock. In addition, the issuance of Preferred
Stock could make it more difficult for a third party to acquire a majority of
the outstanding voting stock. Accordingly, the issuance of Preferred Stock may
be used as an "anti-takeover" device without further action on the part of the
stockholders of the Company. The Company has no present plans to issue any
shares of Preferred Stock.
TRANSFER AGENT
SunTrust Bank, Atlanta, acts as the Transfer Agent for the Common
Shares of the Company.
-10-
<PAGE> 11
PLAN OF DISTRIBUTION
The shares of Common Stock offered hereby for the benefit of the
Selling Shareholders were originally issued by the Company pursuant to the
private placement exemption from registration provided in Sections 3(b) and/or
4(2) of the Securities Act of 1933, as amended. The Company has agreed to
register the shares for resale by the Selling Shareholders. The Company will not
receive any of the proceeds from the sale of such shares by the Selling
Shareholders.
The Common Stock may be sold from time to time by the Selling
Shareholders, or by pledgees, donees, transferees or other successors in
interest. Such sales may be made on one or more exchanges or in the
over-the-counter market, or otherwise, at prices and at terms then prevailing or
at prices related to the then current market price, or in negotiated
transactions. Accordingly, sales prices and proceeds to the Selling Shareholders
will depend upon market price fluctuations and the manner of sale. The shares
may be sold by one or more of the following, without limitation: (a) a block
trade in which the broker or 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 or for its account pursuant to the Prospectus,
as supplemented, (c) an exchange distribution in accordance with the rules of
such exchange, and (d) ordinary brokerage transactions and transactions in which
the broker solicits purchasers. In addition, any securities covered by the
Prospectus which qualify for sale pursuant to Rule 144 may be sold under Rule
144 rather than pursuant to the Prospectus, as supplemented. From time to time
the Selling Shareholders may engage in short sales, short sales against the box,
puts and calls and other transactions in securities of the Company or
derivatives thereof, and may sell and deliver the shares in connection
therewith.
From time to time Selling Shareholders may pledge their shares pursuant
to the margin provisions of their respective customer agreements with their
respective brokers. Upon a default by a Selling Shareholder, the broker may
offer and sell the pledged shares of Common Stock from time to time as described
hereunder.
The Selling Shareholders may effect transactions by selling to or
through one or more broker-dealers, and such broker-dealers may receive
compensation in the form of underwriting discounts, brokerage commissions or
similar fees in amounts which may vary from transaction to transaction. The
Selling Shareholders will pay such brokerage commissions and charges, as well as
the fees and expenses of any counsel retained by them in connection with this
offering. The Company will bear all other expenses in connection with
registering the shares offered hereby, which expenses are estimated to total
approximately $15,000.
LEGAL MATTERS
Certain legal matters with respect to the legality of the shares of
Common Stock offered hereby have been passed upon for the Company by Smith,
Gambrell & Russell, LLP, Atlanta, Georgia. As of June 1, 1997, Smith, Gambrell &
Russell, LLP owned an aggregate of 200,000 shares of Common Stock, which shares
are being offered hereby. See "SELLING SHAREHOLDERS."
-11-
<PAGE> 12
EXPERTS
The financial statements of the Company as of December 31, 1996 and
1995 and for the fiscal years ended December 31, 1996, 1995 and 1994,
incorporated in this Prospectus by reference to the Company's Annual Report on
Form 10-K for the year ended December 31, 1996 have been audited by the firm of
Grant Thornton LLP, independent auditors, as set forth in their report thereon
and are so incorporated in reliance upon such report given upon the authority of
such firm as experts in accounting and auditing.
-12-
<PAGE> 13
================================================================================
NO DEALER, SALESPERSON, OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS, AND,
IF GIVEN OR MADE, SUCH INFORMATION AND REPRESENTATION MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED
HEREBY IN ANY JURISDICTION OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH
OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE AN IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR IN THE AFFAIRS OF
THE COMPANY SINCE THE DATE HEREOF.
-----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Available Information....................................................... 2
Incorporation of Certain Documents by Reference............................. 2
The Company................................................................. 3
Risk Factors................................................................ 5
Use of Proceeds............................................................. 8
Selling Shareholders........................................................ 9
Description of Securities................................................... 10
Plan of Distribution........................................................ 11
Legal Matters............................................................... 11
Experts..................................................................... 12
</TABLE>
================================================================================
================================================================================
VSI ENTERPRISES, INC.
1,521,636 SHARES
COMMON STOCK
P R O S P E C T U S
August 1, 1997
5801 GOSHEN SPRINGS ROAD
NORCROSS, GEORGIA 30071
(770) 242-7566
================================================================================
